APRA’s governance reset: What draft CPS 510 means for boards and company secretaries

On 16 June 2026, the Australian Prudential Regulation Authority released its consultation paper and draft Prudential Standard CPS 510 Governance. The reform consolidates five existing prudential standards (CPS 510 and SPS 510 (Governance), CPS 520 and SPS 520 (Fit and Proper), and SPS 521 (Conflicts of Interest)) into a single, cross-industry standard for banks, insurers and RSE licensees. Consultation closes 28 August 2026, with the final standard and the related practice guide, CPG 510, expected by end of 2026 and a January 2028 commencement date.

APRA’s own supervisory data is telling: around 78% of entities under heightened risk-based supervision have identifiable governance weaknesses. Against a backdrop of domestic and international governance failures, along with a drive for policy simplification, pressure for reform has been building for some time. ASIC’s escalating enforcement activity across responsible entities and superannuation trustees has reinforced that message. Boards are expected to demonstrate genuine oversight, not procedural compliance.

The reform timeline

APRA released its discussion paper in March 2025. Industry feedback raised significant concerns, particularly about tenure limits, independence requirements and early engagement on appointments. In October 2025, APRA announced three material changes: extending the proposed tenure limit from 10 to 12 years; dropping the requirement for two independent directors not on any other group board; and removing the SFI proactive engagement proposal. Alongside the June 2026 reforms, APRA and ASIC jointly announced changes to streamline FAR, including removing key functions requirements and raising notification thresholds.

Consolidation: five standards become one

Five separate, industry-specific prudential standards are consolidated into a single cross-industry instrument, with a unified practice guide CPG 510 to follow. The harmonisation sets a common baseline while preserving carve-outs for different business models, particularly mutuals and industry superannuation funds.

APRA has also extended CPS 001 Defined Terms to include superannuation definitions for the first time, making it the primary reference point for defined terms across all APRA-regulated industries.

Board composition, independence and delegation

Draft CPS 510 requires all locally incorporated regulated entities to maintain an effective governance framework, including documented delegations, formal charters and policies and processes as required by this prudential standard. While RSE licensees already have this obligation under SPS 510, it is new for banking and insurance entities.

Boards may not delegate core prudential responsibilities, involving setting strategic objectives, business plans and risk appetite; overseeing governance, remuneration and risk management frameworks; overseeing culture (including risk culture); setting and monitoring Board, Board committee and director performance objectives; ensuring that directors and senior managers of the institution collectively have the requisite skills; constructively challenging senior managers; overseeing financial and operational resilience and for RSE licensees, overseeing the investment governance framework. Non-core matters may be delegated to Board committees or senior managers. APRA will elaborate on the boundaries in CPG 510.

The minimum five director requirement extends to RSE licensees, and the Australian residency requirement now applies to all locally incorporated entities, including foreign-owned ones. RSE licensees remain exempt from the majority independence and independent chair requirements, preserving the equal representation model.

For banks and insurers, a revised definition of “independent director” aligned with the ASX Corporate Governance Principles is introduced. The automatic presumption of independence at subsidiary board level based on parent board assessment has been removed; independence must now be assessed entity by entity. For locally incorporated regulated entities other than RSE licensees, the shareholder association threshold for board representation increases from 15 to 20%.

Director tenure and board renewal

Draft CPS 510 introduces a 12-year tenure limit for non-executive directors, capturing non-consecutive terms, alternate director periods and tenure at predecessor entities following a merger or transfer. The limit is entity-specific and does not cap total service across different APRA-regulated entities.

Boards may approve a 12-month extension in exceptional circumstances and must notify APRA within 10 days. The term “exceptional circumstances” remains undefined. APRA’s data shows 12% of directors already exceed 10 years and 8% exceed 12 years, making early planning essential.

Skills, capabilities and performance assessment

Boards must document collective skills needs through a structured matrix with measurable rating scales, and take all reasonable steps to address deficiencies. APRA does not prescribe specific skills but expects the matrix to drive succession planning, professional development and appointments.

The uplift is based on supervisory data; a recent APRA thematic review found almost 50% of mutual bank boards had only one or no directors with contemporary industry experience. The original proposal requiring individual-director skills documentation was narrowed to a collective approach, but the standard remains a material step up for many entities.

SFIs must engage an independent external expert to assess board, committee and director performance at least every three years. For all entities, the existing annual fitness and propriety validation for directors may now be conducted as part of the annual performance assessment, streamlining what have traditionally been two separate processes.

Conflicts management: now cross-industry

The conflicts management framework, previously applicable only to RSE licensees under SPS 521, now extends to all APRA-regulated industries. All entities must proactively implement appropriate controls to effectively identify, assess and manage actual and potential conflicts, including those arising from intra-group arrangements, maintain an annually reviewed conflicts management policy and a current register of potential and actual conflicts, with associated controls, and record in minutes of the Board, Board committees and other relevant meetings, details of how conflicts were managed.

The proposed requirement to manage “perceived” conflicts was moved to guidance only following strong industry opposition. RSE licensees continue to publish their registers under the Corporations Regulations. Banks and insurers must maintain but need not publish theirs. The framework aligns with ASIC’s Regulatory Guide 181 on managing conflicts of interest.

Fitness and propriety: strengthened obligations, reduced reporting

Draft CPS 510 revokes CPS 520 and SPS 520 and absorbs fit and proper requirements into the unified standard. The responsible person cohort narrows to align with FAR. Routine reporting forms are removed for approximately 6,000 individuals, with APRA relying principally on FAR reporting instead. The notification obligation where an entity assesses a responsible person as not fit and proper is retained.

This is not a relaxation of obligations. The assessment criteria has been expanded to include professional references and findings from courts, tribunals, regulators and other relevant bodies. The new “all reasonable steps” standard for ensuring that a regulated entity's responsible persons are fit and proper is higher and more outcomes-focused than existing process-compliance approaches.

Regulatory alignment and ASIC’s supervisory posture

For entities operating across both APRA and ASIC perimeters, particularly responsible entities that are also RSE licensees or related bodies corporate of APRA-regulated entities, the cumulative governance expectations create a significant compliance imperative. APRA’s new conflicts requirements align with ASIC’s Regulatory Guide 181, and the removal of duplicative fit and proper reporting reflects a coordinated effort to reduce burden while maintaining accountability.

What boards and company secretaries should do now

Conduct a CPS 510 readiness review. Assess the impact of the draft standard on the entity’s governance framework, board documents, conflicts framework, fit and proper processes, skills matrix and renewal planning. Map your entity classification first (sector, SFI or non-SFI status, group structure) because the requirements vary materially.

Update governance documents. Review board and committee charters, delegations of authority, board renewal policies, conflicts management policies, fit and proper policies, and the board skills matrix. Pay particular attention to committee charters where non-board members currently hold voting rights on APRA-mandated committees.

Assess tenure and plan renewals. Map current director tenure now and identify who will approach or exceed the 12-year limit before the January 2028 commencement date. When considering tenure patterns going forward, three four-year terms, four three-year terms, or shorter periods, factor in independence requirements and skills gaps. The interaction between all three variables makes a long-horizon renewal plan essential.

Build or upgrade the conflicts framework. Banking and insurance entities without comprehensive conflicts management frameworks face the most substantial implementation challenge. Develop a conflicts management policy; establish a register; and ensure board minutes record how conflicts were managed. Entities within group structures must ensure intra-group conflicts are explicitly addressed.

Transition fit and proper processes. Confirm FAR records carry the evidentiary weight that lodged forms previously provided. Develop assessment processes meeting the new “all reasonable steps” standard. Expand assessment criteria. Put in place clear reassessment triggers.

Engage with consultation. Consider lodging a submission by 28 August 2026, particularly on drafting issues requiring clarity for your organisation.