Governance review update
In March 2025, APRA issued a discussion paper about proposed updates to its governance prudential standards.
This review aims to ensure APRA’s governance standards set clear, contemporary minimum expectations for board and senior leadership. The standards are being updated to reinforce good governance practice in line with the critical role APRA-regulated entities play in maintaining trust and stability in the financial system. Boards and senior leadership must be equipped to deliver on their responsibilities and respond to current and emerging risks. In undertaking the review, APRA seeks to improve standards, while accommodating different business models, and reduce unnecessary regulatory burden.
Recent stakeholder feedback has not changed APRA’s view of the need for change but has in some instances identified a more effective policy approach. Today’s letter provides early notice of where APRA has revised some policy positions to better achieve stated objectives. It does not cover all changes APRA may make to its original proposals, but further refinements are likely to be minor in nature. APRA remains confident that its plans to modernise governance standards will deliver better governance outcomes.
Summary insights from consultation
APRA received a broad range of feedback from recent consultation. There was strong recognition of the importance of sound governance practices and the value of raising minimum standards to be consistent with contemporary practice. Many entities indicated that their current practices already align with APRA’s proposals. There was also strong support for initiatives that can reduce burden and address regulatory overlap.
At the same time, many stakeholders expressed a preference for principles-based requirements and flexibility in how they achieve APRA’s intended outcomes. Some representatives of mutuals and industry superannuation funds sought assurance that revised standards would accommodate all business models, noting the specific value they can deliver.
Three topics attracted the most feedback: tenure limits, independence and early engagement with APRA on proposed appointments. In these cases, while stakeholders acknowledged APRA’s concerns, they were not convinced of the net benefit of the proposed solutions.
Initial APRA policy response
APRA will make three material changes to the proposals set out in the March discussion paper. These changes will be formally consulted on in Q2 of 2026.
| Topic | Initial proposal | APRA's response | Rationale |
|---|---|---|---|
| Tenure limit | Impose a lifetime default tenure limit of 10 years for non-executive directors at a regulated entity. | Extend to 12 years. Short extension in limited circumstances. APRA is still working through the appropriate terms and mechanisms for any extensions. To clarify, these limits apply only to a director’s tenure at a specific regulated entity. They do not apply to a director’s total time served across different APRA-regulated entities. | APRA believes a hard tenure limit is necessary to improve board renewal practices but acknowledges that 12 years is more aligned with existing board arrangements and cycles. |
| Independence (banks and insurers only) | Require that at least two independent directors (including the chair) on regulated entity boards are not members of any other board within the group. | APRA will not proceed with the initial proposal. Instead, APRA intends to remove the presumption of independence for directors on multiple group boards (currently set out in paragraph 39, CPS 510). APRA also proposes that intra-group conflicts be explicitly addressed as part of conflicts management and board performance reviews. | APRA remains focused on addressing the management of intra-group conflicts via updates to its governance standards but recognises that the original proposal is not appropriate for all entities. |
| Early engagement on appointments (SFIs only) | Require SFIs, and non-SFIs under heightened supervision, to engage proactively with APRA on potential appointments. | Will not require early engagement on appointments in prudential standards. | APRA still considers early engagement on critical appointments to be best practice. However, APRA will not make it a legal requirement given the process and privacy risks. |
In addition to these three changes, APRA will also clarify or adjust three other proposals where stakeholders have identified unintended consequences or suggested better ways to achieve APRA’s intended outcome.
| Topic | Initial proposal | APRA's response | Rationale |
|---|---|---|---|
| Individual director skills | Require regulated entities to identify and document the skills and capabilities necessary for the board overall, and for each individual director. | Clarify that APRA will not intend for entities to define requisite skills for each individual director role. | APRA still expects entities will have a credible and documented view of requisite board skills and skills that all board members must have. |
| Perceived conflicts | Require regulated entities to consider perceived conflicts, in addition to actual and potential conflicts. | APRA intends to set this expectation in guidance only, having regard to risks posed by making it a legal requirement. | APRA sees value in considering perceived conflicts and believes it in line with contemporary practice and regulatory expectations. |
| Registers of relevant interests and duties (banks and insurers only) | Extend current RSE licensee conflict management requirements to banks and insurers. This includes developing registers of relevant duties and relevant interests and make them public. | APRA intends to require that all regulated entities should develop such register. However, APRA will not require insurers and banks publish them. | APRA remains of the view that registers of relevant interests and duties are important tools for conflicts management. However, APRA is not convinced of the net benefit of public disclosure for banks and insurers. |
Next steps
APRA will provide a comprehensive response to stakeholder feedback on the proposals in the March 2025 discussion paper with release of draft standards and guidance in Q2 of 2026.
APRA will continue to engage with stakeholders over the coming months, via roundtables and bilateral meetings, to understand potential implications for regulated entities.
If you wish to speak with the APRA policy team about this letter or the review more broadly, please contact Ian Beckett via PolicyDevelopment@apra.gov.au.
Yours sincerely
John Lonsdale
Chair