ADI CORPORATE GOVERNANCE
APRA APS 510
Corporate governance documents
APS 510 (Fit and Proper Persons) commenced on 1 October 2006
The prime responsibility for the sound and prudent management of an ADI rests with the Board of directors (the Board) and senior management of the ADI.
Key Objective
That an ADI is well managed, has access to appropriate independent expertise, and gives due consideration to the impact of its decisions on depositors.
Key requirement
The Board and senior management must institute effective governance arrangements within the ADI.
The standards are broadly consistent with ASX Principles however they are prescriptive and any variations require APRA’s consent whilst ASX takes an”if not, why not”approach.
The Eight Key Principles that ADI’s must consider when developing and implementing governance arrangements:
• Responsibility ultimately belongs to the board and senior management
• Independence of directors
• Renewal of the Board
• Expertise on the Board
• Diligence of the Board and management
• Prudent management
• Transparency of dealings
• Oversight by the Board
The Board and senior management
The Board of directors of a regulated institution is ultimately responsible for the sound and prudent management of the regulated institution.
An ADI Board must have a formal charter that sets out the responsibilities and role of the Board. Any delegation of authority to management must be clearly documented.
The Board must ensure that directors and senior management of the regulated institution, collectively, have the full range of skills needed for the effective and prudent operation of the regulated institution, and that each director has skills that allow them to make an effective contribution to Board deliberations and processes.
Board composition
The Board of an ADI must have a minimum of five directors at all times.
The Board must have a majority of independent directors at all times.
The chairperson of the Board must be an independent director of the regulated institution.
A majority of directors present and eligible to vote at all Board meetings must be non-executives.
The chairperson of the Board cannot have been the Chief Executive Officer (CEO) of the regulated institution at any time during the previous three years.
Board Audit Committee
A regulated institution must have a Board Audit Committee.
The Board Audit Committee must have at least three members. All members of the Committee must be non-executive directors of the regulated institution. A majority of the members of the Committee must be independent.
The chairperson of the Board Audit Committee must be an independent director of the regulated institution.
The chairperson of the Board can sit on the Board Audit Committee, but cannot chair the Committee.
Board performance and renewal
The Board of a regulated institution must have procedures for assessing, at least annually, the Board’s performance relative to its objectives. It must also have in place a procedure for assessing, at least annually, the performance of individual directors.
The Board of a regulated institution must have in place a formal policy on Board renewal.