APRA moves impose expertise requirements on super fund boards

The Australian Prudential Regulation Authority (APRA) has announced proposed changes aimed at strengthening prudential governance for superannuation funds, insurers and banks.

The proposed changes, if approved, will have a direct impact on the make-up of some superannuation fund boards, particularly with respect to financial expertise.

The proposed changes include:

• lifting requirements for boards to ensure they have the right mix of skills and experience to deliver the entity’s strategy
• raising minimum standards around the fitness and propriety of responsible persons, and requiring significant financial institutions to engage with APRA on succession planning and potential appointments
• extending existing requirements for superannuation trustees in relation to managing conflicts of interest to banking and insurance
• strengthening board independence, especially in relation to entities that are part of a group
• clarifying APRA’s expectations around the roles of boards, the chair and senior management
• introducing a lifetime tenure limit of 10 years for non-executive directors at an APRA-regulated entity.

Commenting on the changes, APRA chair, John Lonsdale said effective governance is fundamental to financial stability.

“The boards of Australia’s banks, insurers and superannuation trustees have enormous responsibilities when it comes to protecting the financial interests of households and businesses. Well-governed institutions are likely to be more resilient in times of stress, while poor governance can create weakness that leads to misconduct, losses and failures. It is no coincidence that almost 80 per cent of entities subject to heightened risk-based APRA supervision have underlying governance problems.”