APRA releases revised standards on governance for ADI's and insurers

The Australian Prudential Regulation Authority (APRA) has released revised prudential standards on governance for authorised deposit-taking institutions (ADIs) (APS 510)and life insurers (including friendly societies)(LPS 510).

The amendments to the prudential standards result from recent changes to the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations.

The key amendments to the governance standards are that:

• in addition to the principle of independence of directors set out in the standards, APRA has incorporated the ‘relationships affecting independent status’ in the ASX Corporate Governance Council’s Principles as circumstances that would preclude a director from being treated as independent on the Board of an ADI or life insurer. The circumstances are identical to the five “relationships affecting independent status” in the 2nd edition of the ASX Corporate Governance Council Principles. They represent a non-exhaustive list of specific circumstances that would preclude a director from being regarded as independent for the purposes of serving on the Board of an APRA-regulated institution. A director in any of these circumstances would still be able to serve on such a Board, but not as an independent; and
• a Board should give consideration to the length of service of directors as part of its Board renewal policy.

The revised standards will take effect from 1 January 2008.

The revised prudential standard on governance for general insurers (GPS 510) are a result of the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007.