APRA has released a response letter and the final wording of the schedule in relation to how the Banking Executive Accountability Regime (BEAR) applies to variable remuneration arrangements for medium and small authorized deposit-taking institutions (ADIs). The purpose of the proposal was to ensure that application of the deferred remuneration obligations across ADIs is consistent with the intent of the BEAR. The schedule will become effective from July 01, 2019.
APRA had launched, in April 2019, a consultation on the schedule of the kinds of remuneration that are not variable remuneration. APRA had proposed that, irrespective of the organizational structure or whether the ADI is a locally incorporated ADI or foreign ADI, where an individual has both an accountable person role with an ADI (or subsidiary of an ADI) and another role, only the portion of the individual’s variable remuneration that relates to the accountable person role would be subject to the deferral requirements under Division 4 of Part IIAA of the Banking Act 1959. APRA had received seven submissions in response to the consultation. One submission noted that the proposed application of paragraph 2(b) of the schedule was overly restrictive in that it would only apply to an accountable person holding a position in an Australian-incorporated non-ADI subsidiary of the foreign ADI.
After considering feedback received on the consultation on remuneration arrangements under BEAR, APRA acknowledged that where an accountable person of a foreign ADI holds a position in a non-ADI-related body corporate, which does not relate to his/her accountable person role, the portion of this individual’s variable remuneration that does not relate to his/her accountable person role should be excluded from the definition of variable remuneration for the purposes of the BEAR. APRA has amended the wording of paragraph 2(b) of the schedule accordingly. The final legislative instrument will be published before BEAR comes into force for medium and small ADIs on July 01, 2019.
Effective Date: July 01, 2019
Keywords: Asia Pacific, Australia, Banking, BEAR, Variable Remuneration, Operational Risk, Conduct Risk, APRA
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