28 March 2022 - APRA publishes Deputy Chair John Lonsdale’s speech on improving governance in the mutuals sector

In “Banking on a successful future for the mutual sector”, Mr Lonsdale stressed the importance of improving governance, and highlighted board tenure, capabilities, composition and performance assessment as areas with the greatest scope for improvement.

His comments included:

• “APRA considers good governance to be a precondition to sustainable success.”
• “APRA has articulated its concern about excessive tenure within the prudential framework… And yet, directors are remaining on mutual boards far longer than their ASX 200 counterparts. The boards of 19 out of the 60 mutuals regulated by APRA have an average director tenure of at least 10 years.”
• “Under CPS 510 [Governance], boards of APRA-regulated institutions are required to have a majority of independent directors at all times. If the 12-year rule for independence were applied, more than a quarter of mutuals would be non-compliant.”
• “The composition of mutual boards is often a product of history. In a number of cases, mutuals are bound by longstanding constitutional rules that require a majority of directors to be from the ‘bond’ – the customer cohort – or from a particular geographic area. In the interests of their customers and good governance, boards should consider consigning to history outdated provisions in their constitutions that undermine their ability to operate effectively.”