Featured Product

    APRA Proposes Guidance to Support Prudential Standard on Remuneration

    April 30, 2021

    APRA is consulting on CPG 511—the draft Prudential Practice Guide on remuneration for banks, insurers, and superannuation licensees—with the comment period ending on July 23, 2021. CPG 511 sets out principles and examples to assist entities to comply with CPS 511, the prudential standard on remuneration, a consultation for which was released in November 2020. APRA plans to finalize both the guidance and the CPS 511 in the second half of 2021. Entities will be expected to comply with the requirements of CPS 511 from January 01, 2023, under a staged implementation approach. APRA is also conducting a data study with selected entities, to inform its approach to reporting and disclosure requirements for compliance with CPS 511; these requirements will be developed and consulted on with industry in late 2021.

    CPG 511 proposes principles-based guidance for entities to enhance Board oversight, increase the use of non-financial measures in remuneration design, and ensure accountability in case of poor risk management. The aim of the new standard and guidance is to improve remuneration practices across all regulated industries, to deliver stronger incentives for individuals to proactively manage risks, appropriate consequences for poor risk outcomes, and increased transparency and accountability on remuneration. The draft prudential practice guide will assist entities comply with the new CPS 511 by:

    • Outlining examples of better practice in board oversight, including robust challenge and independent scrutiny
    • Setting out framework for defining non-financial measures and determining material weight for use in calculating variable remuneration
    • Setting out principles for downward adjustments of variable remuneration, where there have been poor risk outcomes

    The draft CPG 511 will support CPS 511, providing principles and good practice on key issues such as defining non-financial measures of performance and applying a material weight to these measures in determining variable remuneration. Ultimately, it is for the Board to determine how to apply these principles in a way that is appropriate to an entity’s business model and particular risks. In drafting the guidance, APRA emphasized areas where greater clarity has been requested by entities. APRA also sought to address the findings from the Royal Commission and the principles for sound compensation practices of FSB. 

    Additionally, APRA is conducting a study with selected entities, to inform its approach to reporting and disclosure requirements. In the lead up to the new standard coming into effect in 2023, APRA expects that entities will seek to improve and maintain transparency on their remuneration arrangements. Entities should consider how they will publicly demonstrate that they meet CPS 511 requirements, with clear, comprehensive, and timely disclosures. This could include regular disclosures on:

    • Remuneration governance and oversight, including qualitative information about the remuneration policy, the adjustment tools, and the process to determine remuneration outcomes
    • Remuneration design, including financial performance and non-financial measures, the rationale for why these measures have been chosen, and the weighting applied to them
    • Remuneration outcomes for specified roles, including highly paid material risk-takers, aggregated as appropriate but sufficient in detail to demonstrate how remuneration outcomes have related to performance and risk outcomes
    • Any consequence management applied, including the value of and rationale for downward adjustments to remuneration


    Related Links

    Comment Due Date: July 23, 2021

    Keywords: Asia Pacific, Australia, Banking, Remuneration, CPG 511, CPS 511, Proportionality, Reporting, Operational Risk, Disclosures, Governance, APRA

    Featured Experts
    Related Articles

    EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation

    The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).

    May 23, 2022 WebPage Regulatory News

    EBA Publishes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.

    May 23, 2022 WebPage Regulatory News

    EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks

    May 20, 2022 WebPage Regulatory News

    EC Publishes Results on Review of Web Accessibility Directive

    The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.

    May 19, 2022 WebPage Regulatory News

    NGFS Report Explores Quantification of Climate Risk Differentials

    The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations

    May 19, 2022 WebPage Regulatory News

    MAS Consults on Adjustment Spreads for Conversion of SOR Contracts

    The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.

    May 18, 2022 WebPage Regulatory News

    OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities

    The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.

    May 17, 2022 WebPage Regulatory News

    EBA Proposes Standards to Support Secondary NPL Markets

    The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.

    May 17, 2022 WebPage Regulatory News

    EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution

    The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).

    May 13, 2022 WebPage Regulatory News

    EBA Issues Standards for Crowdfunding Service Providers Under ECSPR

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.

    May 13, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8206