APRA has published An Aid for Directors of ADI’s and insurers.
The Aid is intended to clarify the various requirements and duties imposed on boards by APRA, in addition to those that apply to all entities under the Corporations Act 2001.
In response to concerns that APRA has blurred the line between boards and management, the Aid states that “APRA does not expect that, in meeting these additional obligations, the board takes on responsibilities that fall within the province of management under generally accepted practice.”
However the Aid does explain that:
“The prudential standards will sometimes set down quite particular responsibilities for the board. For example, the board may be assigned specific responsibility for a matter. This means that the board is expected to be ultimately and finally accountable, and to remain in a position so as to be able to justify the actions and decisions of the institution in relation to that matter. In other cases, the standards may require the board to ensure that a particular matter is addressed or action taken. This means that the board should take all reasonable steps and make all appropriate enquiries so that the board can determine, to the best of its knowledge, that the stated matter has been properly addressed. At other times, the standards may provide for the board to set, approve or review a policy or oversee particular work undertaken by management.”
The Aid gives particular attention to the role of boards in relation to governance, risk management and financial management, including capital adequacy.
The role of boards is further discussed in APRA’s letter of 7 October 2014.
You can also see my video on the Liability of Directors of Financial Services Providers.