Australian customer-owned banks may need to cast their search net wider to seek new board members with more skills in technology and other areas, according to the Australian Prudential Regulator Authority (APRA).
Executive Board Member Therese McCarthy Hockey said these mutual banks needed to prepare for a range of strategic risks, including those related to their ability to identify, recruit and retain the right people.
“For the mutuals, our observation is that some boards lack the necessary skills to guide their banks in a modern banking environment, in particular technology skills,” McCarthy Hockey said in a speech to the Customer Owned Banking Association (COBA) CEO and Directors Forum.
“That may require you to upskill existing directors, but you might also need to look beyond your bank’s traditional geographic or industry-based pool to seek fresh talent.”
McCarthy Hockey said tenure was another long-standing issue among mutuals with long board terms raising questions about the ongoing ability of directors to exercise impartial judgement, challenge management effectively and be open to new ideas.
She said almost 80% of APRA regulated entities which were the subject to heightened risk-based supervision had underlying governance problems.
“As the demands on directors have grown in line with changing community expectations and a more complex risk landscape, APRA is acting to ensure our standards keep pace with contemporary practice,” she told the Forum.
McCarthy Hockey noted mutuals had carved out an integral place in Australian banking since the mid-1800s and, although their numbers had declined, they had the largest market share since APRA data collections began with 5% of housing lending.
Aware of the burden of lifting the skills and capabilities of the directors, APRA was also trying to streamline and clarify its expectations for board members and how senior executives could support them.
