The Australian Prudential Regulation Authority (APRA) has released revised prudential standards on governance for authorised deposit-taking institutions (ADIs) and life insurers.

The amendments to the prudential standards, which are minor in nature, were proposed in a discussion paper released by APRA in September this year. They follow recent changes to the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations.

The key amendments to the governance standards are that:

• in addition to the principle of independence of directors set out in the standards, APRA has incorporated the ‘relationships affecting independent status’ in the ASX Corporate Governance Council’s Principles as circumstances that would preclude a director from being treated as independent on the Board of an ADI or life insurer; and
• a Board should give consideration to the length of service of directors as part of its Board renewal policy.

The ASX Corporate Governance Council’s Principles advise Boards to consider the ‘relationships affecting independent status’ in determining the independence of a director. In APRA’s approach, however, the ‘relationships’ represent a non-exhaustive list of circumstances that will not meet the principles of independence in the case of an APRA-regulated institution. This maintains APRA’s approach of providing clarity about its expectations for the independence of directors, an approach that has worked well in practice.

The revised standards will take effect from 1 January 2008.

The revised prudential standard on governance for general insurers (GPS 510) incorporating these changes will be the subject of a separate release since there are additional changes required to that standard as a result of the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007.

The revised Prudential Standard APS 510 Governance for ADIs is available on APRA’s website at www.apra.gov.au/Policy/Prudential-Standards-Guidance-Notes-for-ADIs.cfm, and the revised Prudential Standard LPS510 Governance at www.apra.gov.au/Life/Prudential-Standards.cfm.

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 $3 trillion in assets for 21 million Australian depositors, policyholders and superannuation fund members.

Media and industry inquiries only:
Andrew McCutcheon, Public Affairs Manager
Australian Prudential Regulation Authority
Telephone: 02 9210 3143
Mobile: 0417 528 660

All other inquiries:
APRA Contact Centre 1300 131 060.