APRA opens consultation to governance reforms

The prudential regulator is lifting the governance bar for superannuation funds and insurers with proposed changes to CPS 510, launching a consultation as part of its endeavours to stamp out 'poor practices'.

APRA has laid out revised draft of prudential standard CPS 510 Governance, which ultimately seeks to raise expectations for boards and senior leadership teams.

The updated framework seeks to "reflect contemporary best practice, establish clear benchmarks" with several proposed changes.

APRA wants to streamline compliance by removing duplicative fit and proper reporting requirements, given that the Financial Accountability Regime is now in place. This is expected to eliminate the need to submit forms for some 6000 individuals.

The revised CPS 510 also aims to improve flexibility for boards by enabling them to delegate APRA's board requirements in other prudential standards, and by aligning governance requirements with other codes and regimes where appropriate.

APRA said the changes would also strengthen requirements for board governance, conflicts management and the fitness and propriety of directors and executives.

The consultation is open until August 28.

Submissions in response to the consultation and stakeholder meetings will inform the final standard and related guidance, which is set to be released later in the year.

APRA expects the new requirements to take effect from early 2028.

APRA chair John Lonsdale commented: "Strong governance is fundamental to the safety, resilience and performance of banks, insurers and super funds. Over a long period of time, APRA has observed that problems at our regulated entities can be frequently traced to poor oversight, unclear accountability or weak challenge."

"Alongside lifting expectations, we've sought to strike the right balance between safety and efficiency. In allowing boards more freedom to delegate lower value compliance matters and reducing reporting, our goal is to ensure boards have capacity to direct their attention to the issues of most importance."

This is the final phase of APRA's governance review. The first phase kicked off in March 2025, when APRA flagged the "poor practices" of super fund and insurance boards.

The proposed changes included strengthening board independence, especially in relation to entities that are part of a group and clarifying APRA's expectations around the roles of boards, the chair and senior management.

APRA's action came amid scrutiny of governance failings, including an independent review of Cbus, which found scant evidence of its relationship with the Construction, Forestry, and Maritime Employees Union (CFMEU) being in the best financial interests of members, while also finding it processes for determining the propriety of board directors to be lacking.