On 16 June 2026, the Australian Prudential Regulation Authority (APRA) released a consultation paper, draft Prudential Standard CPS 510 Governance (draft CPS 510), and related amendments to Prudential Standard CPS 001 Defined Terms. This marks a decisive step in APRA’s reform of governance requirements for banks, insurers and superannuation trustees. On the same day, APRA and the Australian Securities and Investments Commission (ASIC) jointly announced a welcome package of changes to streamline the Financial Accountability Regime (FAR) (discussed in our article APRA and ASIC announce welcome reforms to the Financial Accountability Regime).
The consultation on the draft CPS 510 is open until 28 August 2026, with a final standard and related prudential practice guidance (CPG 510) expected by the end of 2026 and commencement from January 2028.
This article examines the key content of APRA's consultation paper, response to submissions, and provisions of draft CPS 510.
Background and reform timeline
APRA's governance review is the first material overhaul of its governance standards since 2012. While governance practices have improved since then, substandard practices have persisted in areas including director skills, fitness and propriety assessments, board performance reviews, tenure and conflicts management. Almost 80% of entities under heightened APRA supervision exhibit underlying governance issues.
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Discussion paper released.
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Submissions closed.
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APRA issued early notice of material changes to tenure limits, independence and early engagement on appointments.
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Draft CPS 510 released; FAR streamlining announced.
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Standard expected to take effect (final standard and CPG 510 expected by end of 2026).
Framework design: consolidation and harmonisation
The most significant structural change is the consolidation of five existing prudential standards into a single, cross-industry standard applying consistent governance minimums to all APRA-regulated industries. The draft standard is structured in three parts: Part A – Board governance (covering governance framework, board role and delegation, composition and independence, skills, performance assessments, renewal and tenure, and group governance); Part B – Conflicts management; and Part C – Fit and proper.
APRA's response to submissions
APRA received submissions from a broad range of stakeholders. Feedback strongly supported the uplift in governance practices, with consistent themes around proportionality, flexibility and avoiding duplication.
Positions maintained
APRA has proceeded largely unchanged with proposals on skills and capabilities, fitness and propriety, board performance reviews, role clarity and board committees. Notably, APRA maintained that only full board members can be voting members of APRA-required board committees, despite strong opposition, particularly from Registrable Superannuation Entity (RSE) licensees.
Positions revised
APRA has made material adjustments to three areas:
- Director tenure: extended from 10-year to 12-year default limit, with a board-approved extension of up to 12 months in exceptional circumstances.
- Independence: the original requirement for at least two independent directors not on any other group board has been abandoned. Instead, APRA will remove the presumption of independence for directors on multiple group boards and require intra-group conflicts to be explicitly addressed.
- Early engagement on appointments: the requirement for Significant Financial Institutions (SFIs) to engage proactively with APRA on potential appointments has been dropped entirely.
Key provisions of the draft CPS 510
Draft CPS 510 clarifies the board's core prudential responsibilities and expressly permits delegation of non-core matters to board committees and senior managers. This is a welcome change, though the distinction between “core” and “non-core” responsibilities is not always self-evident and APRA has indicated it will elaborate on delegation in CPG 510.
APRA does not propose to prescribe specific skills. Instead, boards must identify and document necessary skills, evaluate existing capabilities, and actively address gaps. The requirement for a board skills matrix with clear assessment criteria will require many smaller entities to invest in more formalised processes.
APRA will extend the requirement for bank and insurer boards to have a majority of independent directors to boards of entities with an APRA-regulated parent. The removal of the presumption that directors on multiple group boards can be considered independent will require banking and insurance groups to assess independence case-by-case.
The draft CPS 510 strengthens annual board, committee and director performance assessments and requires SFIs to commission a triennial independent assessment by an external expert.
The 12-year tenure calculation captures total time served, including non-consecutive terms, time as an alternate director and tenure at predecessor entities. The ‘exceptional circumstances’ extension is intended for narrow use but remains undefined.
APRA will extend the separate risk and audit committee requirement to SFI RSE licensees while removing it for non-SFI banks and insurers. The restriction of voting to full board members on APRA-mandated committees will necessitate restructuring of committee charters for entities that have utilised external members with voting rights.
The existing RSE licensee conflict management requirements are extended to banks and insurers. All entities must maintain a conflicts management policy (reviewed annually) and a register of conflicts. APRA has clarified that ’perceived’ conflicts is guidance only, while ‘actual’ and ’potential’ conflicts must be managed under the standard.
The new ‘all reasonable steps’ standard is a higher and more outcomes-focused obligation than existing process-compliance approaches. Assessment criteria have been expanded to include professional references and findings from any court, tribunal, regulator, board, arbitrator, public inquiry or other relevant body.
APRA proposes to remove routine fit and proper forms and rely principally on FAR reporting, eliminating forms for approximately 6,000 individuals. The responsible person cohort will be narrowed to better align with FAR. These measures represent a meaningful and welcome reduction in the overall accountability-related reporting burden.
Draft CPS 510 introduces provisions requiring governance arrangements to operate effectively on a group basis. For foreign branches, the standard clarifies the Senior Officer Outside Australia (SOOA)'s core prudential responsibilities and delegation powers.
International comparison: how does draft CPS 510 compare with the UK?
The UK's Senior Managers and Certification Regime (SM&CR), introduced for banks in 2016 and extended to insurers in 2018, requires individuals performing Senior Management Functions to obtain PRA or FCA pre-approval before commencing their roles. Senior managers are subject to a statutory ‘duty of responsibility’ to take reasonable steps to prevent regulatory breaches within their areas of accountability. Firms must maintain governance responsibilities maps and Statements of Responsibilities. APRA's approach is less interventionist at the point of appointment. There is no regulatory pre-approval. Instead, the entity must take ‘all reasonable steps’ to ensure accountable persons are suitable for their roles.
The UK Corporate Governance Code 2024 (the Code) treats tenure exceeding nine years as a factor likely to impair independence. Unlike what is proposed in Australia, this is not a hard prohibition. Boards retain discretion to conclude that a long-serving director remains independent with adequate explanation. The Code operates on a ‘comply or explain’ basis, while APRA's prudential standards are mandatory and enforceable. This distinction matters because many Australian regulated entities (unlisted mutuals, industry superannuation funds, foreign branches) do not face the market-based investor scrutiny that disciplines UK listed companies.
Both jurisdictions require majority-independent boards. The UK Prudential Regulation Authority has stated that it considers it "generally undesirable" for key positions on subsidiary boards (chair, chairs of key sub-committees, CEO or CFO) to be occupied by executive members of the group or parent board.
Industry-specific considerations
For smaller Authorised Deposit-taking Institution’s, including mutual banks and credit unions, the reforms represent a more substantial step change than for major banks. The new requirements for formalised skills matrices, enhanced fit and proper processes and conflicts registers will require meaningful investment. For larger banking groups, key issues are the removal of the presumption of independence for directors on multiple group boards and the formalisation of delegation frameworks.
Insurers operating within larger corporate groups should focus on independence and conflicts management provisions. While the original ‘two independent directors not on other group boards’ proposal was abandoned, the removal of the presumption of independence still requires reassessment of board composition and conflicts management.
The harmonisation into a single standard, combined with removal of routine fit and proper reporting, should deliver meaningful administrative burden reduction. However, the restriction of committee voting rights to full board members will have the most acute impact on RSE licensees that have relied on external specialist members with voting rights. The extension of separate risk and audit committee requirements to SFI RSE licensees will also necessitate structural changes for larger funds.
Drafting issues and areas of uncertainty
The draft CPS 510 raises several interpretive issues:
- Core versus non-core board responsibilities: the delegation framework depends on this distinction, but the standard does not provide a definitive list of non-delegable matters.
- Tenure calculation: the concept of ‘predecessor entity’ may be ambiguous in complex group reorganisations or fund mergers.
- ‘Exceptional circumstances’ for extensions: this term is undefined and it remains unclear how APRA will assess compliance.
- Potential versus perceived conflicts: the mandatory/guidance distinction is conceptually clear but operationally difficult.
- ‘All reasonable steps’ for fit and proper: the scope is undefined and may vary significantly depending on role seniority and entity complexity.
What regulated entities should do now
Regulated entities should:
- Conduct a gap analysis against draft CPS 510, focusing on skills matrices, conflicts management policies and registers, board delegation frameworks, and enhanced fit and proper processes.
- Assess the impact of the 12-year tenure limit on current board composition and develop a board renewal plan.
- Review board and committee charters, particularly where non-board members currently hold voting rights.
- Evaluate implications of removing the presumption of independence for directors on multiple group boards.
- Consider preparing a submission to APRA by 28 August 2026 on drafting issues requiring clarity.
- Commence implementation planning now. The January 2028 commencement date will arrive quickly.
Conclusion: a well-directed reform, with detail still to come
This is a significant and largely well-directed reform. APRA has consolidated a fragmented framework, responded constructively to industry feedback, and paired governance uplift with genuine burden reduction through removal of routine reporting and FAR streamlining.
However, the draft standard leaves material questions unanswered. Delegation boundaries, the ‘exceptional circumstances’ extension for tenure, the boundary between ‘potential’ and ‘perceived’ conflicts, and the "all reasonable steps" fit and proper standard all lack clarity. The committee voting restriction remains the most contentious unresolved issue.
Regulated entities should not wait for the final standard. The consultation window closes on 28 August 2026. Entities should commence gap analysis now, press APRA for draft guidance, and use the submission process to ensure the final standard delivers the clarity, proportionality and practical workability required.