APRA and ASX are simultaneously consulting on important governance reforms. That timing invites comparison, but the two proposals serve different purposes. APRA’s draft CPS 510 Governance would establish enforceable prudential minimums for APRA-regulated entities. The draft 5th edition of the ASX Corporate Governance Principles and Recommendations remains a flexible “if not, why not” disclosure framework for listed entities.

For banks and insurers, the proposed CPS 510 is more than a drafting refresh. It would consolidate five existing prudential standards into one cross-industry standard, clarify the division between board and management, and require more systematic evidence that governance arrangements work in practice. Many concepts are familiar; the material change is their greater specificity, integration and supervisory enforceability.

APRA released the draft on 16 June 2026. Submissions close on 28 August 2026. APRA plans to release the final CPS 510 and accompanying CPG 510 by the end of 2026, with commencement expected in early 2028. The standard is still a proposal, and important questions about proportionality and transition remain open.

Why APRA is changing the standard

APRA’s stated rationale is straightforward: governance weaknesses frequently sit behind financial stress, operational disruption, conduct failures and poor risk decisions. The review also responds to a more demanding operating environment, including cyber risk, artificial intelligence, geopolitical uncertainty and complex group structures.

The reforms have two competing objectives. They seek to raise the governance floor while reducing avoidable compliance burden. The latter is visible in the consolidation of five standards and proposed removal of routine fit-and-proper reporting for thousands of individuals. The former is visible in more explicit requirements for board information, skills, performance, renewal, conflicts and evidence of remediation.

The proposed key changes

1. One integrated cross-industry governance standard

Draft CPS 510 would combine the current CPS 510 and SPS 510 governance standards, CPS 520 and SPS 520 fit-and-proper standards, and SPS 521 conflicts-of-interest standard. Banks, insurers and superannuation trustees would therefore work from a common core, subject to industry-specific provisions where needed.

For banks and insurers, a notable new requirement is an effective governance framework comprising the rules, processes, roles and practices through which the entity is directed, controlled and held accountable. Existing documents may satisfy the requirement; APRA does not require unnecessary duplication. The practical task will be to demonstrate that the documents operate as a coherent system rather than as an accumulation of separate policies.

2. Sharper board accountability, with more usable delegation

The draft identifies eight core prudential responsibilities that cannot be delegated. These include setting and monitoring strategy, business plans and risk appetite; overseeing culture, governance, remuneration, risk management, financial and operational resilience; setting performance objectives; ensuring the collective capability of directors and senior managers; and constructively challenging management.

Other board obligations imposed by prudential standards may be delegated to a board committee or senior manager, subject to documented limits, alignment with risk appetite, monitoring, reporting, conflicts controls and regular review. This is potentially helpful. It may allow boards to reduce low-value compliance traffic without diluting ultimate accountability. It will, however, require a disciplined mapping of reserved matters, delegated authorities and reporting pathways across all prudential standards.

3. A formal policy for board information

A locally incorporated entity would need a policy setting out the board’s expectations for the content, quality and frequency of management information. Senior managers must brief the board clearly, promptly and transparently, using succinct and relevant information that supports informed, risk-based decisions.

This is one of the most practically significant changes. It moves board reporting from a matter of custom and good practice to an express prudential control. Entities will need to examine board-paper standards, dashboards, escalation triggers, late papers, committee-to-board reporting, access to underlying data and the treatment of dissenting or incomplete information.

4. More demanding composition, committee and group-governance rules

The draft harmonises a minimum board size of five and requires a majority of directors of locally incorporated entities to be ordinarily resident in Australia. For locally incorporated regulated entities other than RSE licensees, the board must have a majority of independent directors and an independent chair. The shareholder-representation threshold would also increase from 15 per cent to 20 per cent.

The existing concessions for some regulated subsidiaries would be tightened. A director serving on another group board would no longer be presumed independent merely because the parent is prudentially regulated. Independence must instead be assessed against actual and potential intragroup conflicts, including structural, funding and remuneration relationships.

Audit, risk and remuneration committees must have at least three members, all of whom are non-executive directors. For entities other than RSE licensees, a majority must be independent and the chair must be independent. Significant financial institutions must maintain separate audit and risk committees; non-significant financial institutions may combine them. These changes could require constitutional, charter, membership or succession changes, particularly in smaller entities, foreign-owned subsidiaries and groups using common directors.

5. A measurable and forward-looking board skills matrix

The draft requires a board skills matrix covering the skills, experience and behavioural attributes needed by the board and its committees, having regard to current strategy, business mix, risk appetite, complexity and likely future needs. The matrix must use clear assessment criteria and proficiency scales that can be measured and verified.

Boards must also demonstrate how they are actively addressing present and future capability gaps. This is a substantial step beyond generic matrices that list broad skills and rely on untested self-ratings. It will require clearer definitions, evidence, calibration, linkage to performance and succession, and careful handling of sensitive individual assessments.

6. Stronger performance assessment and external review

Boards, committees and individual directors would be assessed at least annually. The assessment must cover objectives, the skills matrix, individual effectiveness and the governance framework. The entity must be able to show APRA progress against accepted recommendations.

In addition, a significant financial institution must appoint an independent external expert at least every three years. The review must examine, among other things, challenge, chair effectiveness, workload, meeting cadence, board information, delegation and progress against earlier recommendations. This is not merely a periodic survey; APRA expects a robust, structured and evidence-based exercise.

7. A hard 12-year limit on non-executive director tenure

A non-executive director could not serve the entity or its successor for more than 12 years in total. In exceptional circumstances, the board may approve one extension of up to 12 months and must notify APRA within 10 days.

This is likely to be the most debated proposal. A firm limit can promote renewal and reduce the risk that long association weakens independence. It can also remove valuable institutional knowledge and intensify recruitment pressure in specialist, regional, mutual or group entities. The draft does not yet settle all transitional questions, including the treatment of directors who will be at or near the limit when the standard commences. Those matters warrant clear treatment in the final standard or CPG 510.

8. A cross-industry conflicts-management regime

Banks and insurers would become subject to a more explicit conflicts framework currently associated more closely with superannuation. Entities must identify and assess actual and potential conflicts of interest and duty, avoid conflicts where required or where they cannot be managed effectively, maintain a current conflicts register, document meeting disclosures and responses, train relevant people, monitor compliance and review the policy annually.

The strongest operational impact is likely to be in groups, where directors and executives may owe duties to several entities and where shared services, funding, remuneration, information flows and group strategy can create recurring tensions. Minute-taking and decision records will need to show how conflicts were identified and managed, not simply that a declaration was made.

9. Fit and proper strengthened, but reporting streamlined

The fit-and-proper regime would move into CPS 510 and align more closely with the Financial Accountability Regime. The responsible-person cohort would narrow principally to FAR accountable persons, auditors, actuaries and, for RSE licensees, the RSE secretary. Routine reporting would be removed, although APRA must still be notified following a determination that a person is not fit and proper.

Entities must take all reasonable steps to ensure responsible persons are fit and proper. Assessments must address competence, character, care, diligence, honesty, integrity, judgement, qualifications, experience and, for directors and senior officers outside Australia, time and capacity. Professional references and relevant findings by courts, tribunals, regulators, boards, arbitrators and public inquiries must be considered. The policy must address information collection, consent, retention, reassessment triggers and adverse outcomes.

This is a genuine simplification in reporting, but not a relaxation of substantive due diligence.

How does draft CPS 510 differ from the draft ASX 5th edition?

There is substantial convergence in subject matter. Both drafts emphasise clear board-management delineation, board charters, independent judgement, collective capability, performance assessment, culture, risk oversight and effective committees. The following differences are more important than the similarities.

Dimension

Draft CPS 510

Draft ASX 5th edition

Effect and scope

Mandatory prudential minimum for APRA-regulated entities, listed or unlisted.

Flexible ‘if not, why not’ framework for listed entities, centred on disclosure.

Board capability

Compulsory skills matrix with measurable criteria, proficiency ratings and active gap remediation.

Board assesses collective capability and discloses its process and outcome; a matrix is one possible tool.

Tenure

12-year maximum for non-executive directors, with a limited exceptional extension.

Long tenure remains a factor for the board’s independence assessment; no hard maximum.

Performance

Specified annual assessments; independent external review at least every three years for significant financial institutions.

Periodic evaluation and annual disclosure of whether it occurred; no equivalent mandatory external cycle.

Information and evidence

Formal board-information policy, specified evidence and demonstrable progress against recommendations.

Greater emphasis on public explanation and investor transparency, without comparable prudential evidence requirements.

Conflicts and fit and proper

Detailed cross-industry systems, registers, assessments, reassessment triggers and APRA notification requirements.

No equivalent integrated prudential regime.

A listed APRA-regulated entity will need both regimes. Meeting CPS 510 will not remove ASX disclosure obligations, and explaining an alternative practice under ASX will not displace an APRA minimum.

Where will the impact be greatest?

For large banks and insurers with mature governance systems, many changes will be evolutionary. The work may still be material because existing practices must be recast into a coherent, auditable framework and aligned with the precise requirements of CPS 510.

The structural impact is likely to be greater for smaller and mutual institutions, foreign-owned subsidiaries, entities with common group directors, boards with long-serving non-executive directors, and entities whose committee arrangements rely on people who are not directors. Significant financial institutions will also incur recurring external-review costs.

The highest-cost items are likely to be director succession and recruitment, constitution and charter changes, external performance reviews, legal and governance advice, board-information redesign, systems and registers, fit-and-proper due diligence, training and implementation assurance. APRA’s initial assessment is that aggregate industry cost may be broadly neutral because new investment is offset by consolidation and reporting relief. That aggregate estimate should not be mistaken for an entity-level conclusion: costs will be uneven and no reliable public estimate is presently available for a particular bank or insurer.

What should the company secretary do?

The company secretary is likely to be central to implementation, although ownership must remain appropriately distributed among the board, CEO, risk, people, legal, compliance and internal audit functions.

A practical work program should include:

preparing a clause-by-clause gap analysis and integrated obligations map across CPS 510, FAR, other prudential standards and, for listed entities, the ASX Principles;

mapping the board’s non-delegable responsibilities and revising reserved-matters schedules, delegations, accountability statements and escalation pathways;

reviewing the constitution, board and committee charters, committee membership, voting rights, residency, independence and succession arrangements;

establishing or upgrading the board-information policy, board-paper standards, reporting calendar and assurance over data quality;

rebuilding the skills matrix using defined criteria, evidence and proficiency levels, and linking it to induction, development, performance, renewal and recruitment;

maintaining a tenure and succession dashboard, including service at the entity and any successor, and time served as an alternate director;

integrating conflicts registers, fit-and-proper records and FAR role mapping, while addressing privacy, consent and retention requirements;

planning annual assessments and, for significant financial institutions, procuring a genuinely independent external review;

delivering targeted education for directors, senior managers, paper authors and secretariat staff; and

reporting implementation progress and residual risks to the board, with independent assurance before commencement.

The work should begin with diagnosis during the consultation period. After the final standard and CPG 510 are released, entities should use 2027 for approvals, recruitment, system changes, training, dry runs and assurance. Long-lead matters - particularly director renewal and constitutional or election changes - should be identified early.

Are the proposals novel, surprising or unreasonable?

Most proposals are not novel as governance concepts. Strong charters, reliable information, disciplined delegation, capability assessment, succession, conflicts management and fit-and-proper due diligence are established elements of sound governance. What is novel for many entities is the conversion of those practices into detailed, cross-industry prudential minimums.

The 12-year tenure cap is the clearest departure from a principles-based approach and may be too blunt without workable transition and exemption arrangements. The prohibition on non-directors serving as voting members of key committees is defensible on accountability grounds but may reduce access to specialist expertise, particularly in some superannuation and smaller-entity settings. Group-independence requirements are also directionally sound but may create practical tension between entity-level judgement and efficient group governance.

Other aspects are balanced. Express delegation should help boards focus on strategy, risk and challenge. FAR alignment and removal of routine fit-and-proper forms should reduce duplication. The requirement for a board-information policy addresses a recurring governance weakness that charters alone cannot solve.

One unresolved issue deserves particular attention: APRA asks whether the draft adequately supports governance of artificial intelligence, but the standard does not establish a discrete AI governance requirement. That may be appropriate if AI is treated through strategy, risk appetite, capability, information, delegation and risk frameworks. CPG 510 should nevertheless explain APRA’s expectations where AI materially affects decisions, customer outcomes, operational resilience or board information.

Conclusion

Draft CPS 510 raises the prudential governance floor. It is not a wholesale reinvention of the board’s role, but it would require clearer architecture, stronger evidence and more active remediation than many current frameworks provide.

For boards, the central question will no longer be whether a policy or matrix exists. It will be whether the governance system is coherent, current, proportionate, used in decision-making and capable of being demonstrated to APRA.

The consultation remains open, and the final standard and guidance may change. Entities should therefore avoid premature finalisation, but they should not defer the foundational work. A well-designed gap analysis now will inform any submission, expose long-lead issues and materially reduce implementation risk.

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Governance in Action Pty Ltd can assist clients in preparing for the proposed changes to CPS 510 Governance.

David Cantrick-Brooks FGIA FCG, Principal & Director of Governance in Action Pty Ltd, would be pleased to assist with enquiries. Please feel free to reach out via LinkedIn or via gia.net.au.

AI-assisted tools and techniques were used here to support the research, drafting and editing of this publication. Responsibility for the final content rests with David Cantrick-Brooks.

Whilst accounting and legal terms and references may be contained in this publication, it does not constitute or purport to be or represent accounting or legal advice of any kind – whatsoever. Readers should seek their own professional advice.