The Australian Prudential Regulation Authority (APRA) has urged superannuation licensees to examine whether their board has the optimum mix of skills, capabilities and experience needed to effectively carry out its responsibilities.
In a letter to all registrable superannuation entities (RSEs), APRA today outlined the findings of its thematic review into board governance practices in the industry. The review examined how well RSEs were meeting the requirements of Prudential Standard SPS 510 Governance (SPS 510), which was introduced on 1 July 2013.
The review covered 29 licensees of various types, sizes, ownership models and board structures, and focused on board composition, board appointment and renewal, and approaches to board performance assessments.
Based on the findings of the thematic review, APRA has issued a range of recommendations, including that RSE licensees should:
- consider the optimal composition of their boards in the context of their business and strategic plans;
- consider the extent to which the use of independent experts signals a skills deficiency on the board;
- have sound board renewal and succession planning processes that strike an appropriate balance between ensuring continuity and bringing in diversity and fresh perspectives; and
- develop a robust and objective board assessment process that considers the performance of individual directors, as well as the board as a whole.
APRA Deputy Chairman Helen Rowell said robust governance practices were vital to support sound decision-making and safeguard the best interests of superannuation members.
“The standard of RSE governance is improving, but boards have more work to do. The recommendations in this review provide a clear guide to industry better practice that licensees can review their governance arrangements against, and identify areas for improvement.
“Meeting the minimum requirements of APRA’s prudential framework is not enough. APRA continues to encourage RSE licensees to change their mindset from one of legal compliance to aiming to deliver the best possible outcomes for their members,” Mrs Rowell said.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding approximately $6 trillion in assets for Australian depositors, policyholders and superannuation fund members.
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