Featured Product

    APRA Proposes Stronger Remuneration Requirements in Australia

    July 23, 2019

    APRA is proposing to strengthen prudential requirements for remuneration across all APRA-regulated entities in the banking, insurance, and superannuation industries by issuing CPS 511, a new prudential standard on remuneration. A key feature of the new standard is to promote the use of non-financial performance criteria in designing variable remuneration incentives. This consultation ends on October 23, 2019. APRA intends to publish the final prudential standard in late 2019 or early 2020 and it expects that CPS 511 will come into effect on July 01, 2021. APRA also intends to consult on an updated prudential practice guide in 2020, to support implementation of the new prudential standard, along with the associated reporting standards and disclosure requirements.

    The proposed package of measures address recommendations 5.1 to 5.3 from the final report of the Royal Commission into misconduct in the banking, superannuation, and financial services industry—the recommendations that were endorsed by the government in February. The new standard is a key milestone in the broader agenda of APRA to lift industry practices in governance, culture, and remuneration. The objective of CPS 511 is to ensure that the remuneration arrangements of the APRA-regulated entities promote effective management of both financial and non-financial risks, along with sustainable performance and long-term soundness. APRA is proposing a proportional implementation of the new requirements, with certain heightened expectations applied only to large, complex entities and to certain senior executives and other special roles. While certain components of the package may present challenges for different stakeholders, the impact of the reform should be considered as a whole. The core elements of the standard are to: 

    • Strengthen governance of remuneration frameworks and outcomes, particularly through an expanded board role, where the Board needs to be active and have direct oversight
    • Set overarching remuneration objectives that inform design of all remuneration arrangements and influence remuneration outcomes
    • Limit the use of financial performance metrics (share price and profit-based)
    • Set minimum deferral periods (up to seven years) for senior executives to provide more "skin-in-the-game" through better alignment to the time horizon of risk and performance outcomes

    CPS 511 is expected to complement the Banking Executive Accountability Regime, or BEAR, to lift industry standards of accountability and reduce the likelihood of misconduct. These proposals by APRA will place Australia in line with better international practices. APRA intends to conduct a review of the effectiveness of the prudential standard CPS 511 three years after its initial effective date.


    Related Links

    Comment Due Date: October 23, 2019

    Keywords: Asia Pacific, Australia, Banking, Insurance, Superannuation, Pensions, CPS 511, Remuneration, Operational Risk, Governance, Conduct Risk, BEAR, APRA

    Related Articles

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News

    DNB Publishes Multiple Reporting Updates for Banks

    DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.

    February 28, 2023 WebPage Regulatory News

    NBB Sets Out Climate Risk Expectations, Issues Reporting Updates

    The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting

    February 24, 2023 WebPage Regulatory News

    EBA Updates Address Securitization Standards and DGS Guidelines

    The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.

    February 21, 2023 WebPage Regulatory News

    FSB Publishes Letter to G20, Sets Out Work Priorities for 2023

    The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023

    February 20, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8793