AICD submission on proposed changes to APRA’s governance and fit and proper requirements

On 28 August 2026, the AICD made a submission to the Australian Prudential Regulation Authority (APRA) on proposed changes to the governance and fit and proper requirements contained in a new CPS 510 (Draft CPS 510).

The AICD is supportive of modernising the governance and fit and proper prudential requirements, and in this round of consultation we welcomed APRA’s refinement of a number of the proposals we raised concerns about in our June 2025 submission. However, we continue to be of the view that some of the proposed requirements remain unnecessarily prescriptive.

The AICD's key points in our submission were:

• Independence: We supported APRA’s decision to align the Draft CPS 510 definition of independence with the ASX Corporate Governance Principles, given the harmonisation benefits for listed APRA-regulated entities. However, we encouraged APRA to simplify the proposed requirement relating to directors serving on multiple boards within the same group, including how and when independence is expected to be assessed in practice.
• Board skills: We supported requiring entities to maintain a board skills matrix focused on the collective capabilities of the board and its committees, and welcomed APRA's decision not to require the identification of individual director skills. However, we argued that the inclusion of ‘behavioural attributes’ is not appropriate for a skills matrix, and introduces subjectivity. We also argued that the requirement for proficiency ratings that can be ‘measured and verified’ is overly prescriptive.
• Performance: We are of the view that APRA specifying matters that must be considered in both annual and independent assessments could restrict the ability of boards to determine an approach to director performance assessments that is best suited to their circumstances. We did not support the setting of annual director performance objectives or key performance indicators, on the basis that an effective governance role cannot be neatly quantified through a set of indicators or a performance scorecard.
• Director tenure: We strongly supported APRA’s decision to amend the initially proposed ten-year tenure limit to a 12-year director tenure limit, with the potential for a one-year extension. We also requested clarification in the Prudential Practice Guide (PPG) on when an entity will and will not be treated as a ‘successor entity’ for the purposes of tenure measurement.
• Transition: We argued that non-significant financial institutions should be given at least an additional 12 months (until 2029) to meet board composition and tenure requirements in order to appropriately manage director turnover, and to account for the challenges they can face in recruiting appropriate directors. We also advocated for APRA taking a pragmatic approach to transition arrangements on a case-by-case basis.

APRA plans to release a draft of the PPG alongside the final version of CPS 510 late this year, which we look forward to engaging with APRA on. The new requirements are expected to take effect from early 2028.