APRA releases remuneration standard

APRA/Royal-Commission/john-lonsdale/

30 August 2021
| By Jassmyn |
image
image image
expand image

The prudential regulator has released its standard to strengthen remuneration practices across the insurance, superannuation, and banking industries which will come into effect on 1 January, 2023.

The Australian Prudential Regulation Authority (APRA) released its Cross-industry Prudential Standard CPS 511 Remuneration as part of the three Royal Commission recommendations directed at the regulator.

APRA said the standard heightened requirements on remuneration and accountability aimed at creating more balanced incentive structures, promoted financial resilience, and supported better outcomes for customers.

The standard would require:

  • Entities to apply material weight to non-financial metrics (such as customer complaints, breaches, and regulatory and audit findings) when determining variable remuneration for employees;
  • Entities to reduce variable remuneration, potentially to zero, when warranted by poor risk conduct;
  • New minimum deferral requirements for variable remuneration, coupled with malus and clawback provisions; and
  • Increased board oversight, transparency and accountability on remuneration outcomes.

APRA deputy chair, John Lonsdale, said: “CPS 511 will impose genuine financial consequences on senior banking, insurance and superannuation executives when their decisions lead to poor risk management or conduct that is contrary to community expectations.

“It ensures financial performance alone is no longer enough when companies reward employees; companies must also consider their impact on customers and risk management outcomes. Where executives fall short, they now stand at risk of losing their bonus.

“We have been sensitive to minimising the regulatory burden on smaller institutions that typically make limited use of variable remuneration. The sharp end of CPS 511 is deliberately aimed at significant financial institution, where there is a heavier reliance on bonuses.

“In keeping with APRA’s focus on transparency, the standard will be supported by new disclosure requirements that will allow scrutiny of how effectively boards are adhering to the requirements and holding their executives accountable.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

4 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

5 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

7 months ago

Commonwealth Bank has formally dropped to zero advisers following LGT Crestone’s acquisition of its advice arm – some six years on from the Hayne royal commission. ...

3 weeks 4 days ago

The FSCP has issued a written direction to an adviser who charged clients “extraordinary fees” for inappropriate and conflicted advice, as well as encouraged them to swit...

1 week ago

ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager. ...

2 weeks 3 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
92.15 3 y p.a(%)
3