The Australian Prudential Regulation Authority (APRA) has launched the first step in updating its cross-industry prudential governance standards, publishing a discussion paper with eight proposals aimed at lifting governance practices across banks, insurers and superannuation trustees while removing unnecessary or duplicative requirements. The package is framed as a response to persistent governance weaknesses observed in supervision and a more complex risk environment, alongside a push for simpler and more proportionate regulation where it can be achieved without lowering prudential outcomes. APRA links governance to supervisory outcomes, noting that almost 80 per cent of entities under intensified supervision have governance problems. The proposals include strengthened expectations that boards actively assess whether their collective skills and experience are fit for purpose and take steps to address gaps, and more rigorous fit and proper processes that go beyond “box ticking” and require boards to remove directors where warranted. APRA does not propose approving appointments, but intends to increase oversight of succession planning and nominations. Measures attracting particular attention 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 a group governance proposal that would require some directors to focus solely on the interests of the regulated entity within a corporate group to mitigate intra-group conflicts. In parallel, APRA is reviewing proportionality settings, including thresholds distinguishing significant and non-significant financial institutions that benefit from simpler requirements in areas such as capital and liquidity. The governance proposals are in a three-month consultation period, and APRA is engaging with regulated entities and industry bodies before responding formally.

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