Australian Prudential Regulation Authority flags | Australian Markets

Australia’s prudential regulator has proposed the largest shake-up of board guidelines governing the banking, superannuation and insurance coverage industries in more than a decade.

The Australian Prudential Regulation Authority on Thursday revealed eight proposals to strengthen its prudential governance framework for the three sectors, together with a tenure restrict of 10 years for non-executive administrators.

APRA chair John Lonsdale mentioned efficient governance was basic to financial stability and sound risk management.

“The boards of Australia’s banks, insurers and superannuation trustees have enormous responsibilities when it comes to protecting the financial interests of households and businesses,” Mr Lonsdale mentioned.

“Well-governed institutions are likely to be more resilient in times of stress, while poor governance can create weakness that leads to misconduct, losses and failures.

“It is no coincidence that almost 80 per cent of entities subject to heightened risk-based APRA supervision have underlying governance problems.”

The modifications proposed by APRA might additionally power “significant” financial establishments to have interaction with the regulator on succession planning and appointments.

Different proposal embrace lifting necessities for boards to make sure they’ve the right combination of abilities and expertise, raising minimal requirements on the fitness and propriety of accountable individuals, and increasing present necessities for superannuation trustees over the management of conflicts of curiosity to banking and insurance coverage.

APRA additionally desires to strengthen board independence, particularly in relation to entities which might be half of a group and make clear its expectations across the roles of boards, the chair and senior management

“While overall standards of governance have improved over recent years, we still see areas of weakness, including entities treating compliance with some requirements as a box-ticking exercise,” Mr Lonsdale.

“By articulating our expectations more clearly and strengthening our capacity to ensure compliance with them, we aim to lift governance standards among entities that are lagging best practices and bring them into line with contemporary expectations.”

He mentioned APRA wished to elevate requirements with out including the governance price burden and argued most of the proposals would contain little change for entities with robust governance practices already in place.

The modifications are open to public session, with APRA focusing on a formal session period within the first half of subsequent 12 months earlier than they arrive into power in 2028.