The Australian Prudential Regulation Authority (APRA) has released the new requirements for insurers, authorised deposit-taking institutions, and superannuation entities to publicly disclose information on remuneration practices.
The updated Prudential Standard CPS 511 Remuneration requires APRA-regulated entities to annually publish information on their remuneration frameworks, design, governance, and outcomes.
Larger and more complex APRA-regulated entities must also share additional information, including payments to top executives and how they have approached non-financial measures, including risk management.
Last year, APRA released a consultation paper on the proposed changes to the remuneration disclosure requirements. The proposal sought to enhance transparency and market discipline in the Australian financial services industry and highlight the impacts 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,” said APRA Chair John Lonsdale. “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.”
The new requirements will commence for all APRA-regulated entities from their first full financial year following 1 January 2024.
APRA is expected to provide some flexibility around the timing of disclosures, with annual disclosures required within six months of entities' financial year-end. Moreover, it will publish the findings from an implementation review of CPS 511 to assist regulated entities with coming into compliance with the new requirements.
Last month, APRA also released a new prudential standard to help insurers, banks, and superannuation trustees improve their operational risk management.
