The Australian Prudential Regulation Authority has begun updating its cross-industry prudential governance requirements by issuing a discussion paper with eight proposals for banks, insurers and superannuation trustees and opening a three-month consultation. The package is positioned to lift board capability and accountability while also stripping out duplicative expectations, allowing greater delegation of day-to-day matters, and applying simpler requirements for smaller and less complex institutions. APRA linked the review to supervisory experience, noting that almost 80 per cent of entities under intensified supervision have governance problems. Proposed changes include requiring boards to demonstrate they have actively assessed the skills and experience mix needed and are taking steps to address gaps, and strengthening fit and proper processes through more credible vetting and an expectation that boards remove directors where necessary. APRA does not propose introducing a regime for it to approve appointments, but intends to step up oversight of succession planning and nominations. Other prominent proposals include a mandated 10-year tenure limit for non-executive directors, with APRA able to grant a two-year extension in limited and exceptional circumstances, and group governance measures to address intra-group conflicts by requiring some directors to focus solely on the interests of regulated entities rather than serving across multiple boards in the same group. In the same remarks, APRA also pointed to ongoing work to make the broader prudential framework more proportionate, including reviewing the thresholds that distinguish significant financial institutions from non-significant financial institutions that benefit from simpler requirements in areas such as capital and liquidity. APRA indicated it will continue engaging with regulated entities and industry bodies during the consultation and respond formally after considering feedback on the package.

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