Insuring fit and proper standards

The Australian Prudential Regulation Authority (APRA) is seeking comment on its revised draft of “fit and proper” standards and guidance notes for authorised deposit taking institutions, general insurance and life insurance institutions.

APRA also released a discussion paper addressing submissions received on the original draft fit and proper standards published in March 2004.

The package, which follows extensive industry consultation, outlines proposals for APRA-regulated institutions to:

• be responsible for assessing the fitness and propriety of persons to act as a director, senior manager, auditor or actuary;
• develop and document appropriate policies for making fit and proper assessments;
• require responsible persons to co-operate in the process of gathering information for such assessments; and
• inform APRA of changes in responsible persons.

APRA’s chairman Dr John Laker said that the proposed standards make clear that it is the responsibility of each APRA-regulated institution to ensure that persons who fill positions of responsibility are fit and proper. APRA will only become involved when it has specific concerns about an individual and the institution concerned cannot or will not take action to overcome the problem.

“The proposals are designed to give institutions flexibility to develop their own policies on fitness and propriety. APRA will not be prescribing detailed criteria which these policies will need to meet, but it will provide guidance to help institutions meet their obligations. APRA expects institutions to exercise sound judgment and to act prudently”, he said.

The AICD is currently reviewing the paper with the view to responding regarding the areas that most impact directors.

Details are at www.apra.gov.au