APRA Prudential Standard CPS 510 Governance
This Prudential Standard sets out minimum foundations for good governance of an APRA-regulated institution in the deposit-taking, general insurance, life insurance and private health insurance industries, and of a Head of a group. Its objective is to ensure that an institution and group is managed soundly and prudently by a competent Board (or equivalent), which can make reasonable and impartial business judgements in the best interests of the institution and group and which duly considers the impact of its decisions on depositors and/or policyholders.
The ultimate responsibility for oversight of the sound and prudent management of an APRA-regulated institution rests with its board of directors (or equivalent). The ultimate responsibility for oversight of the sound and prudent management of a grouplies with the Board of the Head of the group.
It is essential that an APRA-regulated institution and group has a sound governance framework and conducts its affairs with a high degree of integrity. A culture that promotes good governance benefits all stakeholders of an institution and group and helps to maintain public confidence in the institution and group.
The governance of an APRA-regulated institution and group builds on these foundations in ways that take account of the size, complexity and risk profile of the institution and group.
The key requirements of this Prudential Standard for a locally incorporated APRA-regulated institution and a Head of a group are that:
- specific requirements with respect to Board size and composition are met;
- the chairperson of the Board of directors must be an independent director;
- the Board must have a policy on Board renewal and procedures for assessing Board performance;
- a Board Remuneration Committee must be established and the institution or group must have a Remuneration
- Policy that aligns remuneration and risk management; and
- a Board Audit Committee and a Board Risk Committee must be established.
Where an APRA-regulated institution is the Head of a group, this Prudential Standard requires that the group has in place governance arrangements appropriate to the nature and scale of the group’s operations, and the provisions of this Prudential Standard are applied appropriately throughout the group, including in relation to institutions that are not APRA-regulated. In addition, where specified, the Head of a group must comply with the requirements on a group basis.
A number of the requirements in this Prudential Standard apply to foreign authorised deposit-taking institutions, Category C insurers and eligible foreign life insurance companies.
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