APRA’s first consultation paper on proposed governance changes explained the policy driver: entities under heightened supervision often have governance issues, and APRA identified persistent weaknesses in skills, fitness and propriety, board reviews, tenure and conflicts management.
APRA’s thinking seems clear: improving governance standards will lead to less regulatory intervention and better prudential (and consumer) outcomes.
APRA’s second consultation on governance is a clear signal: governance uplift is moving from principle to implementation. On 16 June 2026, APRA released draft Prudential Standard CPS 510 Governance, with consultation open until 28 August 2026, final standards and guidance planned for late 2026, and commencement expected in early 2028. The draft consolidates five existing governance, fit and proper, and conflicts standards into one cross-industry CPS 510, applying consistent minimums across banking, insurance and superannuation, while retaining targeted differences for locally incorporated entities, foreign branches and particular sectors.
The factual position is that APRA has listened — but not stepped back
In response to first-round submissions, APRA has adjusted several of its proposals:
- the 10-year director tenure cap has become a 12-year default limit with a 1-year extension permitted with board approval and notification to APRA;
- streamlining of fit & proper and FAR requirements
- a single cross industry standard on Conflict of Interest with the often ambiguous category of ‘perceived conflicts’ to sit in guidance rather than the standard;
- banks and insurers will not be required to publicly disclose conflicts registers;
- APRA will not require SFIs to submit full triennial board review reports; and
- APRA has not proceeded with its proposed mandatory consultation prior to board appointments (but expect APRA to engage with regulated entities on appointments where APRA is aware of these occurring and has concerns)
Our interpretation is that APRA has moved from hard supervisory intervention to disciplined board self-governance — but with clearer evidence requirements.
The key client question is no longer whether governance reform will happen. It is whether boards can show that their governance frameworks work in practice. Draft CPS 510 requires locally incorporated entities to maintain an integrated governance framework, clarify board and senior management roles, use delegation more confidently, maintain board skills matrices, assess board and director performance, and manage renewal through a 12-year default tenure limit.
How we got here: what the submissions tell us
APRA received submissions from a broad cross-section of the prudentially regulated industry and governance community to its first consultation. Notable contributors included the Australian Banking Association (ABA), Australian Financial Markets Association (AFMA), Financial Services Council (FSC), Australian Institute of Company Directors (AICD), Governance Institute of Australia, AustralianSuper, Australian Retirement Trust, HESTA, ASFA, Commonwealth Bank-affiliated entities, Cuscal, Australian Unity, Hollard, Munich Re, MUFG, People First Bank and the Institute of Internal Auditors Australia.
The breadth of submissions is noteworthy. While large institutions tended to focus on implementation complexity, governance structures and regulatory burden, smaller entities and specialist organisations often provided practical observations on board effectiveness, governance capability, committee structures, director succession planning and emerging skills requirements. The overall picture is one of broad support for APRA’s objective of strengthening governance, coupled with a consistent desire for greater proportionality and flexibility in how those objectives are achieved.
Several themes emerged repeatedly across the submissions:
- Strong support for governance uplift and clearer governance expectations.
- Concerns that some proposals in the first consultation round were overly prescriptive and risked reducing board discretion.
- Requests for greater recognition of different ownership structures, including mutuals, member-based organisations and foreign-owned groups.
- Concerns regarding the practical application of independence requirements in group structures.
- Support for board performance reviews and board renewal, provided boards retain flexibility in how those processes are undertaken.
- Broad support for APRA consolidating governance, fit and proper and conflicts requirements into a single prudential standard.
How the PFS submission fits into the debate
PFS’s submission to the first consultation round was broadly supportive of APRA’s objective to strengthen governance standards, while advocating for a more principles-based and practical implementation approach.
Several themes from the PFS submission appear consistent with the direction APRA has subsequently taken.
First, PFS supported stronger board performance review requirements and encouraged a robust review methodology incorporating interviews with directors, the CEO and senior management, observation of board and committee meetings, and assessment of board culture and strategic oversight. PFS also emphasised that governance reviews should provide meaningful insight into board effectiveness rather than become a compliance exercise.
Second, PFS highlighted the importance of director capability and succession planning. The submission noted that governance outcomes are heavily influenced by the quality of board appointment processes and recommended additional guidance for appointing bodies, significant shareholders and other stakeholders involved in director nominations. This remains highly relevant as boards consider how to comply with the proposed tenure and board renewal requirements.
Third, PFS supported greater clarity regarding governance responsibilities and accountabilities but cautioned against unnecessarily prescriptive requirements that may not accommodate different organisational structures and governance models.
Finally, PFS emphasised that governance reform should focus on improving board effectiveness and organisational outcomes rather than increasing documentation for its own sake. This theme aligns closely with APRA’s stated objective of ensuring boards possess the skills, independence, oversight capability and governance practices necessary to prudently manage regulated entities.
Superannuation Fund/RSE Trustee Boards, a special call out
For superannuation funds, the reforms are especially significant because APRA proposes to decommission or consolidate the separate superannuation governance, fit and proper and conflicts standards — SPS 510, SPS 520 and SPS 521 — into draft CPS 510. RSE licensees will need to map existing SPS-based governance frameworks into the new CPS architecture, preserving SIS Act obligations while aligning with CPS 510 terminology, artefacts and review cycles. APRA states that RSE public conflicts-register requirements remain grounded in primary legislation, even though banks and insurers will not be required to publish equivalent registers. This distinction matters: super funds should treat consolidation as a simplification of form, not a reduction in member-focused governance obligations.
Superannuation boards should also revisit equal representation, nominations and board capability. APRA says the reforms do not change the equal representation model, but submissions from ACTU, ASU, ART, AustralianSuper, CareSuper and the Law Council demonstrate a live concern: skills, fit and proper and tenure requirements must not unintentionally override member-representative governance or statutory appointment processes. This is also where PFS’s first-round position remains relevant: PFS recommended tailored guidance for appointing bodies, significant shareholders and elected directors so that those involved in nominations understand APRA governance expectations before candidates reach the board table.
Locally incorporated vs Branches, what’s the difference?
For other APRA-regulated entities, the most important divide is between locally incorporated entities and branches. Part A of draft CPS 510 is directed at locally incorporated entities, while Part E adapts requirements for foreign ADIs, Category C insurers and eligible foreign life companies, recognising different business models and legislative settings. Locally incorporated banks, insurers and private health insurers should focus on board composition, independence, committee structure, skills, performance review, tenure and internal audit. Branches should focus on SOOA responsibilities, local senior manager governance, remuneration and audit obligations.
Internal Audit
One drafting issue deserves attention: internal audit. Draft CPS 510 appears to place the explicit internal audit function requirement within the locally incorporated entity part of the standard, while Part E for foreign branches addresses audit obligations differently. Current CPS 510 states that an APRA-regulated institution must have an independent and adequately resourced internal audit function, while also addressing foreign branch access to head office audit functions. Yet APRA’s consultation paper says internal audit obligations have not been substantively changed. Our interpretation is that APRA should clarify this point. The drafting may be intentional because branch governance is handled through Part E and head-office assurance arrangements; however, given APRA’s statement of no substantive change, it could also be an unintended narrowing or unresolved drafting issue. PFS has submitted a query to APRA regarding this drafting.
What you should know in preparation for the revised CPS510
Forward-looking entities will not wait to act. They will use the time prior to 1 January 2028 to simplify governance architecture, sharpen accountabilities, test board effectiveness and make improvements. They will also use this time to review tenure and plan for board renewal, develop board succession plans (where warranted), review fitness & propriety assessments, and reassess independence.
For many boards, an independent board governance review or board performance review will be the most efficient way to identify what must change, what can be delegated, and where governance practice can move from compliant to genuinely effective.
- Undertake a CPS 510 gap assessment across board charter, committee charters, delegation instruments, fit and proper policy, conflicts policy, board renewal policy, skills matrix, and management information.
- Test whether board papers and delegations actually support strategy, risk oversight and challenge.
- Refresh board skills matrices to include emerging risks such as cyber, AI, payments, scams, geopolitical, operational resilience and member/customer outcomes.
- Design board performance reviews that are evidence-based, forward-looking and connected to renewal, capability and prudential performance.
