The Australian Prudential Regulation Authority (APRA) today released new and harmonised prudential standards on governance for authorised deposit-taking institutions and for life and general insurance companies. The new standards have been developed after extensive industry consultation.

Strong corporate governance is essential to the prudent management and financial soundness of financial institutions and in maintaining public confidence in the financial system. Reflecting this, APRA already has a number of governance requirements in place but they do not apply evenly across the industries it supervises.

The new standards harmonise APRA's governance standards across these industries (except for superannuation) and bring them into line with what has become accepted in Australia as good practice in corporate governance.

APRA Chairman, Dr John Laker, said that the new standards are an integral part of reforms to Australia's supervisory framework aimed at enhancing the decision-making processes of those charged with running regulated institutions.

"The community expects regulated institutions to have a sound governance framework and to conduct their affairs with a high degree of integrity. Accountability rightly stops with the board."

The new standards build on existing requirements in two main ways:

• they seek to promote greater independence on the part of the board, its chair and the board audit committee; and
• they require boards to have a formal policy on board renewal and procedures for assessing their own performance.

APRA's governance framework consists of prudential standards that set out minimum foundations for good governance, and separate prudential practice guides that provide non-binding guidance on meeting these standards and on prudent practices in governance matters.

In developing its framework, APRA has, where possible, aligned its requirements and definitions with the Corporations Act 2001 and with the Australian Stock Exchange (ASX) Corporate Governance Council's Principles of Good Corporate Governance and Best Practice Recommendations.

"Well-run regulated institutions will have no difficulty in meeting APRA's requirements in this area. Most institutions have already introduced stronger governance arrangements, of their own accord", Dr Laker said.

Dr Laker said that APRA also has the flexibility to respond to genuine concerns from institutions that believe they have sound reasons for not meeting a specific requirement in the standards.

The three new governance standards are APS 510 Governance (for authorised deposit-taking institutions), LPS 510 Governance (for life companies) and GPS 510 Governance (for general insurers). The standards come into effect from 1 October 2006, with transition arrangements available for certain matters.

The standards and their accompanying prudential practice guides are located on APRA's web site at:

Authorised Deposit-Taking Institutions
Prudential Standards
Prudential Practice Guides

General Insurance
Prudential Standards
Prudential Practice Guides

Life Insurance
Prudential Standards
Prudential Practice Guides

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:
Pauline Hayes, Public Affairs Manager
Australian Prudential Regulation Authority
Telephone: 02 9210 3143
Mobile: 0417 528 660

All other inquiries:
APRA Contact Centre
1300 131 060