APRA update on board requirements
The Australian Prudential Regulation Authority (APRA) has issued an update on its review of requirements for boards of authorised deposit-taking institutions (ADIs), which include banks, building societies and credit unions, as well as general insurers and life companies.
The review, announced on 7 October 2014, was undertaken to clarify APRA’s requirements of boards and management under its prudential standards and supporting guidance materials.
Following a period of consultation, APRA has provided a summary and response to key issues raised by submissions.
According to the summary, submissions set out the need for:
- reduced ambiguity regarding the separation of board and management responsibilities, particularly in relation to the frequent use of the phrase ‘the board and senior management’ across prudential standards when describing responsibilities;
- a smaller and more consistent set of terms to be used across all prudential standards, for example in relation to the board’s requirements to receive reports or information;
- greater reliance on Prudential Standard CPS 220 Risk Management (CPS 220) in outlining the board’s responsibilities with respect to risk, rather than different requirements across each prudential standard relating to specific types of risk;
- greater clarity of the board’s ability to delegate certain responsibilities under prudential standards to management or a committee.
In their update, APRA state that it will now undertake a review of the prudential framework over time and make amendments to prudential standards as opportunities arise taking into account the recommendations made in the submissions it has received. It anticipates that “planned reviews will result in a reasonable proportion of the ADI, general insurance and life insurance prudential standards (that contain relevant board requirements) being reviewed over the next three years or so”.
For more information, see APRA’s letter to ADI’s and insurers regarding a review of board requirements