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Greater Transparency: APRA

Tuesday 12 July 2022

The prudential regulator is consulting on the improving transparency in the Australian banking sector.
Proposals to remuneration
Australian Prudential Regulation Authority (APRA) Deputy Chair John Lonsdale said in a formal statement, “Transparency is important to a well-functioning system. APRA’s proposed disclosure requirements will ensure investors and the community can see how key executives are rewarded, and that consequences are applied where there are poor risk outcomes.”

Last week, the regulator shared a list of proposed remuneration requirements that would support Standard  CPS 511 for remuneration:

  • APRA-regulated institutions will be required to publicly disclose information on how their remuneration arrangements are designed, and how risk is factored into remuneration outcomes for key executives. This will ensure transparency on how executives are rewarded and incentivised, and on consequences where risk is managed poorly;
  • large and complex financial institutions will be required to disclose how they have placed a material weight on non-financial metrics (such as risk management and conduct) and remuneration outcomes for the Chief Executive Officer, other key executives and material risk-takers;
  • APRA will publish centralised statistics to provide greater comparability of remuneration outcomes across APRA-regulated entities, supported by reporting requirements that are proportionate to their size and complexity; and 
  • the proposed remuneration disclosure and reporting requirements will take effect after the implementation of CPS 511 in 2023 for large entities and 2024 for smaller entities.
Public Disclosure
The prudential regulator has also made some proposed Prudential Standard  APS 330 Public Disclosure to align public disclosure requirements  with international standards. 

The regulator said in a formal statement, “APRA further proposes to remove disclosure requirements relating to prudential risk metrics for smaller authorised deposit-taking institutions (ADIs). Instead, APRA will use the centralised publication to promote transparency and to reduce disclosure requirements for this segment of the banking industry.”