The Australian Prudential Regulation Authority (APRA) has the power to force banks and insurers to remove board members or top executives after releasing new “fit and proper” standards.

The new “fit and proper” standards come into effect on October 1.

APRA Chairman John Laker says the onus is on regulated institutions to ensure that their boards, senior management and other responsible people are fit and proper.

“APRA will not be vetting appointments and we see our powers as reserve powers – to be used when an institution is unable or unwilling to take action itself,” he said.

Dr Laker says the community expects people occupying responsible positions in regulated institutions to have the appropriate skills, experience and knowledge for their roles, and to act with honesty and integrity.

“APRA’s new prudential standards will strengthen protection for policyholders against the risks of incompetence, mismanagement and fraud and will, more generally, help to underpin public confidence in regulated institutions,” he said.

APRA says the framework brings Australia into line with international supervisory benchmarks in this area. The regulator says that where possible it has harmonised its requirements with the “fit and proper” regime for responsible officers administered by the Australian Securities and Investments Commission.