APRA’s Governance Proposals – Sharper Standards for Stronger Boards

Hall Advisory
8 hours ago
4 min read

A practical look at APRA’s proposed updates to governance standards and how boards can act now to stay ahead of the 2028 implementation.

It’s been over a decade since APRA’s governance standards saw significant reform. That’s about to change. APRA’s recent discussion paper outlines eight key proposals designed to strengthen governance, fit and proper assessments, and board performance.

In a fast-changing landscape with increasing regulatory expectations, the need for resilient and capable boards is more important than ever. And these proposed reforms are a call from APRA for boards to step up.

This article summarises the key proposals, their implications and practical actions boards can take now.

Why this review matters now

Over recent years, much of APRA’s supervisory activity and enforceable undertakings have been for issues rooted in weak governance. Though APRA assesses an overall improvement in governance practices, there’s still more work to do. Its investigations reveal persistent governance shortcomings in some areas and some regulated entities.

78% of entities under heightened supervision have governance issues.

APRA notes the main areas of weakness include director skills and capabilities, limitations in fitness and proprietary reviews, inadequate focus on assessing board performance, problems from overly long tenure and subpar conflicts of interest management.

A recent cohort-based thematic review found almost 50% of boards of mutual banks had only one, or no directors with contemporary industry experience. If your organisation’s board was reviewed today, would APRA see confidence or concern?

A summary of APRA’s eight proposals

APRA’s discussion paper shares eight proposals to strengthen its governance prudential standards and guidance in:

CPS 510 and SPS 510 Governance,
CPS 520 and SPS 520 Fit and Proper, and
SPS 521 Conflicts of Interest.

Here’s a summary of the proposed requirements for regulated entities:

Proposal	Focus
1. Board skills and capabilities	Define and document board and individual director skills and capabilities. Evaluate existing skills and capabilities. Proactively address gaps through professional development, succession planning and appointments.
2. Fit and proper standards	More specific definition of fit and proper. Higher minimum requirements for a responsible person's fitness and proprietary. That includes better verification processes to consider time capacity to fulfill the role, all criminal offences or reputational risk. Clearer triggers for assessing fitness and proprietary. Earlier engagement with APRA — especially for SFIs and non-SFIs under heightened supervision.
3. Conflicts of interest	Requirements expanded to cover banks and insurers to: Proactively identify actual, potential and perceived conflicts. Avoid or prudently manage conflicts. Act to remediate undisclosed or mismanaged conflicts.
4. Board independence	Tightened definition of independence for boards of banks and insurers: At least two independent directors (including the chair) must not sit on other boards within the same entity group. Directors with significant holdings in any type of security (not just shares) will no longer be considered independent. The requirement for a board majority of independent directors will now also apply to subsidiaries with APRA-regulated (or equivalent overseas) parent entities.
5. Triennial board performance reviews	Every three years, significant financial institutions (SFIs) must engage qualified independent experts to conduct a performance assessment of boards, committees and individual directors. APRA would then receive the resulting report. The board chair is accountable for ensuring these assessments are completed and any recommendations are appropriately addressed.
6. Clarified roles	Clearer definitions of board, chair and senior management roles with better guidance for delegation to board committees and management.
7. Committee structure updates	Current requirement for boards of banks and insurers to separate risk and audit committees now applies to SFIs (including super). Only full board members can vote on APRA-required board committees.
8. Director tenure	A 10-year lifetime tenure limit applies to non-executive directors, with limited exceptions. A robust, forward-looking process is required for board renewal.

If finalised, the new standards would apply from 2028. That gives regulated entities time to adapt to higher standards, but that time is limited.

Rather than scrambling to meet new governance requirements in 2028, now is a good opportunity to refresh your board’s structure, skills and oversight — on your terms.

The proposals would bring Australian governance standards broadly in line with international standards. But governance isn’t the same for every entity type. Next, we’ll consider how the proposals impact different regulated entities.

Who’s affected and how?

The proposals outlined in APRA’s Governance Review won’t land the same for all regulated entities.

SFIs will shoulder the bulk of the heavier requirements.

For non-SFIs, proposals 2, 5 and 7 are scaled back. But the intent is the same: stronger governance, sharper oversight and clearer expectations.

Board and governance professionals will need to pay attention as these proposals are more than tweaks to governance arrangements – they reshape the rules of engagement. The bar is rising as

APRA urges boards to move from compliance checklists to meaningful oversight. Governance professionals will need to build frameworks that stand up to APRA scrutiny and support real board effectiveness.

Key practical implications include:

Long-serving directors may face tenure limits and need to step down. And future appointments will need to align with clearer expectations around skills, capability, and fitness.
Skills and succession planning will need to be more deliberate and better documented. Boards will need to go beyond identifying capability gaps and work to close them.
Governance assessments are set to become more rigorous. For SFIs, this means triennial independent reviews that cover individual directors, not just collective performance.

Submissions in response to APRA's proposals are open until 6 June 2025. If there are proposals you believe raise practical concerns or require further clarification, now is the time to share your perspective with APRA.

Risks of inaction

While the proposals aren’t final, the shift in expectations has begun. Engaging early gives your organisation the chance to plan proactively and influence where the standards land.

Delaying action until the standards are locked in means less time to prepare. That could lead to hasty implementation or missed opportunities as you play catch-up. And if your organisation’s governance doesn’t meet APRA’s raised standards once in effect, it may mean higher scrutiny, intensified supervision or even enforcement action.

What you can do now

Here are a few ways you can build the kind of governance APRA wants to see rather than waiting until you’re under its magnifying glass.

1. Assess your internal capacity

Do you have the resources and clarity to interpret the proposals through the lens of your business model, size, and strategy?

Identify internal owners for each proposal area (e.g. governance, board renewal, fit and proper assessments).
Consider whether you need external support to help translate APRA’s expectations into practical actions.

2. Plan ahead, don’t wait for final rules

Though the final standards are still a way off, early planning can prevent rushed changes later.

Map the changes most likely to be adopted, such as director tenure limits or board review requirements.
Build these expectations into your board renewal, skills matrix and review planning cycles now. Consider how you might balance continuity of knowledge with board renewal going forward.
For proposals still subject to stakeholder feedback, create contingency plans so you’re not caught off guard.

3. Get ready to operationalise change

Once final standards and guidance are released, intentional implementation will help you manage your obligations well.

Plan a staged approach that integrates with existing governance frameworks and business planning.
Assign clear ownership for implementation and regular progress reporting to the board.
Review board and committee charters early so you’re not revising everything under time pressure later.

4. Rethink your board performance review process

If you’re an SFI, independent triennial reviews will soon be mandatory. But even for others, the bar will be raised.

If you’ve used the same provider repeatedly, consider bringing in a fresh perspective to help uncover insights that routine reviews miss.
Use review findings to inform skills planning, succession, and overall board effectiveness rather than just to tick the box.

How we can help

At Hall Advisory, we work with boards and executive teams to strengthen governance frameworks that are not just compliant but effective, enduring and suited to your organisation.

We can support you with:

Policy and framework reviews (governance, fit and proper, conflicts)
Independent board performance assessments
Board renewal planning and skills matrix development
Submission preparation and regulatory engagement strategy
Strategy, risk and compliance alignment with Financial Accountability Regime (FAR) and prudential standards

APRA’s governance reforms are coming — but they don’t have to disrupt your organisation. Now’s the time to reflect on your board’s current state, review what’s changing, and respond with a plan before the standards are finalised. If you’re looking to assess your readiness, plan your response or uplift your governance frameworks with clarity and confidence, we’re ready when you are.

Get in touch