Elevating Governance: A new era of accountability

Skills and capabilities​

Boards must collectively have the necessary skills, knowledge, and experience, but there is no explicit requirement for individual directors.​

The proposal requires entities to document necessary skills and capabilities, evaluate existing skills, and address gaps to ensure boards are equipped to support their strategy.​

• Document the necessary skills and capabilities for board members and assess current board composition to identify gaps via Board Skills Matrices, Diversity and Fit and Proper policies. ​

Fitness and propriety​

Entities must have policies to assess the fitness and propriety of responsible persons, but practices vary widely.​

The proposal sets higher minimum requirements and emphasises outcomes over process compliance, ensuring responsible persons are fit and proper.​

• Review and enhance existing fitness and propriety policies to align with good practice, focusing on skills, experience and integrity.​

• Strengthen Board appointment and verification processes by incorporating independent checks and reducing reliance on self-assessments to ensure responsible persons meet the higher standards.

Conflicts management​

Banks and insurers have different conflict management obligations compared to RSE licensees.​

The proposal extends conflict management requirements to banks and insurers, ensuring proactive identification and management of conflicts.​

• Review existing Conflicts Management policies and practices to confirm the extent that actual, potential and perceived conflicts are covered. ​

Independence (Banks and Insurers only)​

Boards must have an independent chair and a majority of independent directors, but criteria for independence are limited.​

The proposal strengthens independence by requiring at least two independent directors not to serve on other boards within the group and amends independence criteria.​

• Review existing conflicts management policies and practices to understand the extent to which intra-group conflicts are covered. ​

• Review Board composition requirements (skills, experience and independence) and consider transition plans to incorporate independence requirements.​

Board performance review​

Boards must assess performance annually, but the scope and depth of reviews vary.​

The proposal requires SFIs to commission independent third-party performance assessments every three years to ensure thorough evaluations.​

• Develop or review existing Board Performance Review processes to ensure they are sufficiently robust to address the requirements (including scope and extent of independent involvement).​

Role clarity​

APRA standards provide limited guidance on board and chair roles.​

The proposal defines core expectations for boards, chairs, and senior management, clarifying responsibilities and delegation.​

• Review and where required clarify the Board roles and responsibilities described within FAR Accountability Statements, Charters and Delegations of Authority to management.

Board ​

committees​

Banks and insurers must have separate risk and audit committees, but RSE licensees are only required to have an audit committee.​

The proposal extends the requirement for separate committees to SFI RSE licensees and allows flexibility for non-SFI banks and insurers.​

• Review existing Board Committee structures in light of the size of the organisation to ensure there is a sharpened focus on both risk and audit related matters. ​

Director ​

tenure and​
Board renewal​

Boards must have a formal policy on renewal, but tenure limits are not consistently applied.​

The proposal imposes a 10-year tenure limit for non-executive directors and requires robust board renewal processes to promote diversity and fresh perspectives.​

• Review processes for managing director tenure and board renewal to comply with proposed limits and promote diversity.​

• Develop or uplift Board Appointment Policies and Succession plans to start to incorporate changes. ​