The
Australian Prudential Regulation Authority (APRA) has released a
discussion paper on proposed amendments to prudential standards
on governance for authorised deposit-taking institutions (ADIs),
general insurers and life insurers and a revised Prudential
Standard APS 510 Governance for ADIs. The change is expected to take effect from 1 January 2008.
These
amendments follow the release of the ASX Corporate Governance
Council’s Principles and Recommendations (2nd ed) which contained changes to the provisions on the independence of board directors.
As the ASX document no longer provides a definition of independence but identifies a number of “relationships affecting independent status” that Boards should consider in determining a director’s independence, APRA proposes to redraft its standard.
APRA will remove reference to the definition of independence in the 1st edition of the ASX Corporate Governance Council Principles. Instead, the paragraph will refer to circumstances that will not satisfy the principle of independence.
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.
APRA is also proposing that an ADI’s Board Renewal policy must give consideration to whether directors have served on the Board for a period which could, or could reasonably be perceived to, materially interfere with their ability to act in the best interests of the regulated institution.
Written submissions on these proposals should be submitted by 28 September 2007.
Prudential
standards on governance for general insurers and life insurers (GPS 510
and LPS 510) will also be revised in the same way, but will be
finalised subject to a number of other changes required as a result of
the Financial Sector Legislation Amendment (Simplifying Regulation and
Review) Bill 2007. APRA will consult separately on those other changes.
UPDATE 28 November 2007: Final standards issued
