The Australian Prudential Regulation Authority (APRA) today called on Australian company boards in the banking, insurance and superannuation industries to retire directors who do not meet APRAs stringent "fit and proper" standards.

APRA General Manager for Enforcement, Dr Darryl Roberts, today told the Annual Conference of the Association for Compliance Professionals of Australia (ACPA) that some directors were not meeting the high standard expected of those entrusted with safe-guarding the communitys finances.

"While we are confident that the vast majority of directors comply with APRA standards, almost every serious situation we come across in the financial services sector can be traced back to management and, ultimately, a weak board," he said.

APRAs standards for finance sector leaders go well beyond the traditional requirements of having no history of convictions or bankruptcy.

"These days, the boards of regulated entities must be diligent, commercially astute, balanced and totally independent," he said. "We expect them to be screening all prospective board members and senior executives for these attributes."

Examples of issues that have come to APRAs attention include boards which:

• are under the undue influence of a dominant Chief Executive Officer;
• neglect accountability for accurate financial reporting;
• fail to control inside dealing and lending to associates;
• allow audit independence to be compromised by management; and
• tick off major transactions that are not supported by due diligence.

APRA expects entities to retire unsuitable directors or it will use its regulatory powers to do so.

"If companies fail to screen and cull their boards, APRA will remove directors who have proved themselves unsuitable for the role of protecting the interests and assets of superannuants, policy holders and deposit holders."

A copy of Dr Roberts presentation is available on the APRA website at www.apra.gov.au

APRA is the prudential regulator of the financial services industry including banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. It currently regulates $1.5 trillion in assets for 20 million Australians.