The Australian Prudential Regulation Authority (APRA) is set to introduce new rules for the board of directors. The proposed tenure limit of 10 years impacts long-term serving directors. It will significantly change board competition across the financial sector, including banks and superannuation funds.
APRA focuses on good governance and accountability within the financial industry. The changes are aimed at bringing fresh perspectives and strengthening the institutions. It will be a major shake-up of standards following a string of governance scandals in the past. The tenure limit is for non-executive trustee directors. Meanwhile, the financial regulators are raising the minimum standards and proper tests for the board of directors.
APRA proposals will apply broadly across the 1500 entities it regulates including super funds and non-significant financial institutions.
John Lonsdale, APRA chairman, said in a media briefing that in some cases more than 10 years of tenure might be acceptable, however, it is very much an exception. He also said that these are something that they are consulting on.
No attack on equal representation
He further clarifies that APRA is not attacking the equal representation model or rewriting any other primary legislation. Instead, it aims to improve the governance of the boards of regulated entities. They aim to improve the governance of the board of entities under its regulation.
The proposal focuses on skills, capabilities, fitness and prosperity, conflict management, independence, Board performance review, role clarity, director tenure and board renewal.
The Association of Superannuation Funds of Australia chief executive, Mary Delahunty, stated that the superannuation sector was “fully aware of its obligations” regarding governance standards. She emphasized that overseeing $4.2 trillion in savings is a “significant responsibility,” one that trustees take with the utmost seriousness.
Meanwhile, Lonsdale noted that the regulator would take a more proactive approach in questioning board appointments if it believed a candidate did not meet the required standards. However, he clarified that determining the suitability of directors remains primarily the responsibility of boards, with APRA intervening only when necessary.