Changes aim to strengthen board standards and oversight across financial institutions
The Australian Prudential Regulation Authority (APRA) has outlined eight proposed reforms to enhance governance standards for banks, insurers, and superannuation trustees.
The changes, which mark the first major update in over a decade, aim to align governance requirements with modern best practices, addressing areas of poor performance and ensuring financial institutions are led by individuals with the necessary skills, experience, and integrity.
“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,” said APRA Chair John Lonsdale (pictured above). “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.”
He noted that nearly 80% of entities under APRA’s heightened supervision had governance-related issues. While standards have improved, he said some institutions still treat compliance as a “box-ticking exercise.”
APRA’s proposed reforms include:
- Strengthening board requirements to ensure directors have the right skills and experience
- Raising fitness and propriety standards for responsible persons and requiring significant financial institutions to discuss succession planning with APRA
- Extending conflict-of-interest rules from superannuation trustees to banks and insurers
- Reinforcing board independence, particularly for entities within larger corporate groups
- Clarifying APRA’s expectations for board, chair, and senior management roles
- Imposing a 10-year tenure limit for non-executive directors at APRA-regulated entities
The prudential regulator plans to apply the changes proportionately, easing requirements for smaller, less complex institutions. It also aims to streamline governance rules by removing redundant obligations and consolidating standards across all regulated sectors.
“In developing these proposals, we aim to lift higher standards without adding undue cost burden,” Lonsdale said. He added that institutions with strong governance practices would see little impact, while clearer board responsibilities should help directors focus on strategic priorities.
APRA has launched a three-month consultation period to gather input from financial institutions, industry bodies, and consumer representatives. The regulator plans to release revised prudential standards in early 2026, with the final framework set for publication in 2027. The new requirements are expected to take effect by 2028.
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