The Australian Prudential Regulation Authority (APRA) today released new and harmonised 'fit and proper' prudential standards for authorised deposit-taking institutions and for life and general insurance companies. The new standards have been developed after extensive industry consultation.
APRA Chairman, Dr John Laker, said that the onus is on regulated institutions to ensure that their boards, senior management and other responsible persons are fit and proper.
"The community expects that persons occupying responsible positions in regulated institutions have the appropriate skills, experience and knowledge for their roles, and act with honesty and integrity. APRA's new prudential standards will strengthen protection for depositors and policyholders against the risks of incompetence, mismanagement and fraud and will, more generally, help to underpin public confidence in regulated institutions."
The new standards are aimed at enhancing the calibre of those charged with running APRA-regulated institutions. The standards establish a minimum benchmark for acceptable practice in the appointment of Board directors, senior management, and certain auditors and actuaries. Key elements of the new standards are:
- regulated institutions must have their own policies, and take all prudent steps, to ensure their responsible persons are fit and proper;
- the fitness and propriety of a responsible person must generally be assessed prior to initial appointment and reassessed annually; and
- additional criteria must be met for the appointment of certain auditors and actuaries.
The standards involve only minimal reporting requirements.
APRA's fit and proper framework is in line with its new approach to prudential guidance. The framework consists of principles-based prudential standards and separate prudential practice guides, which provide non-binding guidance on meeting these new standards and on prudent practices in fit and proper matters. The framework also brings Australia into line with international supervisory benchmarks in this area.
In developing its framework, APRA has harmonised its requirements with ASIC's fit and proper regime for responsible officers, where possible. The prudential practice guides confirm that in assessing a responsible person, an institution can give weight to another regulator's assessment, or information collected for that assessment, where it is current and relevant.
The three new fit and proper standards are APS 520 Fit and Proper (for authorised deposit-taking institutions), LPS 520 Fit and Proper (for life companies) and GPS 520 Fit and Proper (for general insurers). The standards come into effect from 1 October 2006.
APRA itself has powers to remove a responsible person who it considers is not fit and proper. "APRA will not be vetting appointments and we see our powers as reserve powers - to be used when an institution is unable or unwilling to take action itself", Dr Laker said.
The standards and their accompanying prudential practice guides are located on APRA's web site at:
Authorised Deposit-Taking Institutions
Prudential Practice Guides
Prudential Standards
General Insurance
Prudential Practice Guides
Prudential Standards
Life Insurance
Prudential Practice Guides
Prudential Standards
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, friendly societies, and most members of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding approximately $2.2 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.
Media and industry inquiries only:
Stuart Snell, Head of Public Affairs
Australian Prudential Regulation Authority
Telephone: 02 9210 3384
Mobile: 0407 250 276
All other inquiries:
APRA Contact Centre
1300 131 060
