APRA's leverage on executive remuneration
Banks or other authorised deposit-taking institutions overseen by the Australian Prudential Regulation Authority(APRA) will risk having higher than normal capital requirements imposed upon them if they provide executives with salary packages regarded as encouraging risk taking.
Releasing an APRA consultation paper on executive remuneration, APRA executive member John Trowbridge made clear that boards of regulated institutions would be held accountable for compliance with APRA’s prudential requirements for remuneration.
He said APRA intended adopting a principles-based approach which, together with its active supervision of regulated institutions, would be aimed at ensuring compliance with both the intent and substance of those requirements.
“Where the remuneration arrangements of a regulated institution are likely to encourage excessive risk-taking, APRA has several supervisory options, including the power to impose additional capital requirements on that institution,” Trowbridge said.
In its discussion paper issued yesterday, APRA said it proposed extending its existing governance standards to cover remuneration, thereby requiring boards to have a remuneration policy in place as well as a board remuneration committee.
AUTHOR
Mike Taylor
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