APRA narrows remuneration frame

The Australian Prudential Regulation Authority (APRA) has reacted to submissions received by the financial services industry and has narrowed the number of positions on which companies will have to make remuneration reports.

The regulator made clear that the new standards would not be applied solely to the banking industry and that they would be equally applicable to other prudentially regulated industries.

The regulator announced this week that while it was the intention that the remuneration requirements generally apply to senior management positions, it acknowledged that some regulated institutions held this to apply to a wider range of persons — and that this created a potential burden.

It said that under the narrower criteria, Board Remuneration Committees would now be required to make annual recommendations on CEOs, the direct reports of CEOs, persons performing the same or substantially the same functions and duties, and other persons whose activities may (in the Committee’s opinion) affect the financial soundness of an institution.

However, the regulator said it would be retaining the right to specify any other person to be subject to an individual recommendation from a Board Remuneration Committee to the Board.

APRA also made clear that just because an institution claimed to be satisfactorily regulated offshore would not absolve it from being subject to Australian jurisdiction.

Commenting on the changes, APRA executive member John Trowbridge said that while the regulator’s approach remained unchanged in principle, it had revised some aspects on the basis of the second round consultations.