APRA wants bank leaders to step up for customers or step aside

Banks, insurers, and super funds could be forced to shake up their leadership teams under new governance rules proposed by APRA today.

The regulator says too many boards have become stagnant, too many directors have stayed too long, and too many financial institutions still see governance as a compliance exercise rather than a responsibility.

The changes, which are APRA’s first major update in over a decade, would cap non-executive directors at 10 years, tighten independence rules and force major institutions to check in with regulators before making key hires.

APRA Chair John Lonsdale didn’t hold back.

"Well-governed institutions are likely to be more resilient in times of stress, while poor governance can create weakness that leads to misconduct, losses and failures," he said, adding that governance issues are the reason nearly 80% of institutions are under APRA’s close watch.

What could change under the proposed rules?

The most controversial change is a lifetime 10-year cap for non-executive directors. Some financial institutions have had the same directors for decades, and APRA clearly thinks that’s a problem.

The new rules would also:

• Expand conflict-of-interest restrictions beyond super funds to include banks and insurers.
• Limit parent company influence over subsidiaries by strengthening board independence.
• Give APRA more oversight on leadership appointments at major institutions.

There’s bound to be some resistance, especially from longstanding board members who don’t see why they should have to step down.

But Lonsdale framed the reforms as bringing stragglers in line with modern governance, not punishing those who are already doing the right thing.

"Most proposals will involve little change for entities with mature governance practices," he said.

What this means for you

If these changes go ahead, banks will be under more pressure to fix governance issues before they start costing customers.

No one will forget the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (2017–2019), which uncovered years of overcharging, fees for no service, and other failures that left customers out of pocket.

Some of these problems went unchecked for more than a decade, only coming to light when regulators and public scrutiny forced banks to act.

For home loan borrowers, stronger oversight could mean fewer surprises, whether it’s clearer communication around rate changes or better scrutiny of fees. Governance failures have a way of trickling down, and if banks are forced to address them earlier, it could lead to a more transparent lending environment.

APRA’s proposed rules could change that. Stronger board oversight and tighter scrutiny on leadership could mean governance failures are caught and addressed earlier, rather than being ignored until a full-blown inquiry forces action.

What happens now?

A three-month consultation period kicks off today, giving banks, insurers and super funds a chance to weigh in. After that, the timeline looks like this:

• 2026: APRA releases formal draft regulations.
• 2027: Final framework is published.
• 2028: New rules come into effect.

No one’s getting forced out tomorrow. But if APRA follows through, a lot of financial institutions will be facing boardroom shake-ups within the next few years.

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