The Australian Prudential Regulation Authority (APRA) has finalised new requirements for authorised deposit-taking institutions (ADIs), insurers and superannuation entities to publicly disclose information on aspects of their remuneration.
Under the updates to Prudential Standard CPS 511 Remuneration, APRA-regulated entities will need to annually publish information on their remuneration frameworks, design, governance and outcomes. Larger and more complex entities must disclose additional quantitative information, including on payments to top executives and how they have placed a material weight on non-financial measures such as risk management.
APRA Chair John Lonsdale said the changes would enhance transparency and market discipline within the financial services industry and shine a light on the impact of risk failures and bad behaviour on remuneration outcomes.
"The financial services Royal Commission demonstrated conclusively how poorly designed and executed remuneration frameworks can lead to bad outcomes for the community by incentivising the wrong kinds of behaviours.
"One way to combat this is through heightened transparency. The disclosure obligations will shine additional light on how executives are incentivised and on the consequences for poorly managed risk," he said.
Following industry feedback to the consultation launched mid-last year, the new disclosure requirements will now commence for all entities from their first full financial year following 1 January 2024. APRA has also agreed to provide additional flexibility around the timing of disclosures with annual disclosures required within six months of an entity's financial year-end.
As part of the consultation, APRA also proposed collecting and publishing more granular data on remuneration. APRA's response to submissions to its consultation on draft Reporting Standard CRS 511 Remuneration will be delayed to ensure issues raised by industry are adequately addressed. The commencement date will be extended accordingly.
Separately, APRA will shortly publish the findings from an implementation review of CPS 511 to assist industry with implementing the new requirements.
A response paper to the CPS 511 consultation and the updated prudential standard are available on the APRA website at: Remuneration requirements for all APRA-regulated entities.
