APRA Governance Standards: New Rules Proposed for Australia's Financial Sector

On 16 June 2026, the Australian Prudential Regulation Authority (APRA) released eight proposals for the final phase of its governance review. The consultation includes an updated draft of Prudential Standard CPS 510 Governance, which would introduce new requirements for board composition, director tenure, independence, conflicts management and delegation across banks, insurers and superannuation trustees.

APRA does not supervise every financial or digital asset business operating in Australia. Its prudential framework primarily applies to banks, insurers and superannuation trustees. Other businesses may instead require an AUSTRAC DCE registration in Australia for digital currency exchange services or an Australian Financial Services Licence for regulated financial products and services. Holding either authorization does not, by itself, make an entity subject to APRA’s prudential standards.

APRA has organised the reform around four main changes:

• Stronger governance requirements. The draft would strengthen requirements covering board governance, conflicts management, and the fitness and propriety of directors and senior executives.
• Reduced reporting duplication. APRA proposes to remove routine fit and proper reporting because the Financial Accountability Regime covers much of the same information. According to APRA, the change would remove reporting obligations for approximately 6,000 individuals across regulated entities.
• Greater delegation flexibility. Boards would be able to delegate certain responsibilities set out in other prudential standards to board committees or senior managers, while remaining accountable for the decisions made.
• A consolidated cross-industry standard. The proposed CPS 510 would bring five existing prudential standards into a single framework, giving banks, insurers and superannuation trustees a more consistent governance baseline.

Two parts of the draft could have a significant operational impact: the proposed tenure limit for non-executive directors and the revised independence requirements for banks and insurers within corporate groups.

A 12-year tenure limit for non-executive directors. APRA initially proposed a 10-year limit but increased it to 12 years following industry feedback. Under the updated draft, a board could approve an extension of up to 12 months in exceptional circumstances and would need to notify APRA within 10 days of approval.

The limit would include all time served on the board, whether consecutive or not. It would also take account of service as an alternate director and, in certain merger or transfer scenarios, time spent on the board of a predecessor entity. Regulated entities with long-serving directors should therefore assess how the proposal could affect board renewal and succession planning.

Revised independence assessments within group structures. For banks and insurers, APRA proposes to remove the current assumption that a director assessed as independent at the parent level is automatically independent when serving on the board of a regulated subsidiary.

Each director appointed as independent would have to satisfy the CPS 510 independence test in relation to the specific regulated entity. The assessment would need to consider actual and potential conflicts arising from other roles within the group, both at appointment and on an ongoing basis.

• 16 June 2026: APRA released the updated draft CPS 510 and proposed amendments to CPS 001 Defined Terms for consultation, together with its response to earlier industry feedback.
• 28 August 2026: The consultation closes. APRA is seeking submissions on the draft standard, the proposed removal of routine fit and proper reporting, and the related changes to CPS 001.
• Late 2026: APRA intends to publish the final CPS 510 and the accompanying Prudential Practice Guide CPG 510.
• Early 2028: The new requirements are expected to take effect, subject to the outcome of the consultation.

APRA Chair John Lonsdale linked the proposals to governance weaknesses that the regulator has repeatedly observed across regulated entities.

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Strong governance is fundamental to the safety, resilience and performance of banks, insurers and super funds, — he stated.

Lonsdale also said the additional delegation flexibility should give boards more capacity to focus on higher-priority matters. At the same time, the draft would strengthen requirements relating to board tenure, independence, conflicts management and accountability.

Although the proposed requirements are not expected to take effect until early 2028, some areas may require significant preparation:

• Compare existing governance, fit and proper, conflicts management and delegation arrangements with the draft CPS 510.
• Identify non-executive directors who may be approaching or exceeding the proposed 12-year tenure limit and consider the implications for succession planning.
• Review independence assessments for directors who hold positions across related entities within the same corporate group.
• Examine existing delegation frameworks to confirm that responsibilities, monitoring processes and board accountability are clearly documented.
• Consider whether the proposals raise practical or drafting issues that should be addressed in a submission before the consultation closes on 28 August 2026.

The final requirements may change following consultation. Entities should therefore distinguish between preparations that can begin immediately, such as governance mapping and data collection, and implementation decisions that depend on the final wording of CPS 510.

Equilex supports regulated entities in assessing proposed prudential reforms, reviewing board composition and governance frameworks, and preparing consultation submissions and implementation plans. To discuss how the draft CPS 510 may affect your organisation, complete the contact form on our website or schedule a call with one of our specialists. We will reach out to you within 24 hours.