APRA governance reforms enter final phase

By Catherine Maxwell, General Manager, Policy & Advocacy, Governance Institute of Australia

The Australian Prudential Regulation Authority’s review of governance requirements for regulated financial institutions is in its closing stages, with submissions on the draft standard due by 28 August 2026. APRA began its governance consultation process in early 2025 and attracted significant attention.

Key member concerns

Last year, the Governance Institute facilitated roundtables with APRA representatives and members to explore concerns about the regulator’s reforms. Those discussions informed the Institute’s position on the changes.

Our 2025 submission covered a range of issues:

• The need to align the Corporate Governance Principles and Recommendations and APRA definitions of an independent director.
• Concerns about the proposition to require additional independent directors within group board structures.
• The need to avoid duplication with requirements under the Financial Accountability Regime.
• The proposed 10-year limit on director tenure.
• APRA’s proposed early involvement in board succession planning for Significant Financial Institutions (SIFIs).

Welcome changes, but questions remain

In October 2025, APRA released a response to industry feedback. It indicated it would revise its proposals on director tenure, board composition requirements for banks and insurers, and early engagement in succession planning for SIFIs.

APRA has said the ‘new CPS 510 is designed to reflect contemporary best practice, establish clear benchmarks and address existing areas of poor practice’. While the revised standard has several welcome changes, the Governance Institute has identified areas where further APRA guidance will be needed and where unintended consequences may arise. It will also be important to ensure APRA’s final proposals are aligned with the forthcoming review of the Corporate Governance Principles and Recommendations, which are expected to be released for consultation in July this year.

Practical implementation challenges

The revised APRA proposals also raise several practical questions that will be of interest to boards and governance professionals.

Areas of improvement include:

• Removing duplicative fit and proper reporting requirements now that the Financial Accountability Regime reporting framework is in place.
• Greater flexibility for boards through the ability to delegate APRA requirements contained in other prudential standards
• Streamlining governance requirements by consolidating five prudential standards into a single framework.

Areas where potential clarification or guidance may be required include how the proposed definition of independence and the extension of director tenure to 12 years will operate in practice.

It would also be helpful for APRA to provide further guidance on what might constitute ‘exceptional circumstances’ warranting an extension of a director’s tenure. APRA has retained the proposal to include ‘behavioural attributes’ in the board skills matrix. In members’ experience, it is expected that all board members possess the appropriate behavioural attributes at the highest level, but the level of a particular skill may vary from director to director.  The Governance Institute will engage with APRA to determine how it considers this proposal is intended to work in practice. APRA has also proposed a new management reporting policy {Clause 20].

Again, we will highlight potential practical implementation issues in our engagement with APRA.

The final standard and related guidance are due to be released in late 2026, with the new requirements set to take effect from early 2028.