Legal development

APRA launches consultation on remuneration and bank disclosures

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    What you need to know

    • APRA has launched two new consultations proposing heightened disclosure requirements for financial institutions, as follows:
      • new remuneration disclosure and reporting requirements to support Prudential Standard CPS 511 Remuneration (CPS 511); and
      • amendments to Prudential Standard APS 330 Public Disclosure (APS 330) to align with updated international standards and the new bank capital framework.
    • The proposed changes aim to improve transparency and to facilitate access to quality data for market participants.
    • Both consultations are open until 7 October 2022.

    What you need to do

    • Consider how the proposed requirements may impact your organisation's existing disclosure frameworks.
    • Consider preparing a submission to APRA if you have any concerns or suggestions for better implementation.

    Remuneration requirements


    Last year, APRA released the final version of CPS 511 which aims to improve transparency and strengthen accountability in relation to regulated entities' remuneration arrangements. For further information on CPS 511, please see our previous Financial Services Update.

    On 6 July 2022, APRA released for consultation proposed amendments to CPS 511. The amendments contain new disclosure requirements and a draft Reporting Standard CRS 511.0 Remuneration (draft CRS 511.0). APRA's discussion paper and associated documents can be found here. Together, the proposed changes seek to promote greater transparency in remuneration practices across APRA-regulated entities.

    What is being proposed?

    The proposed amendments to remuneration requirements are outlined below:

    Disclosure on remuneration arrangement design 

    Under the proposed amendments to CPS 511, entities will be required to publicly disclose information relating to their remuneration practices on an annual basis, including:

    • how the remuneration framework is governed and designed;
    • how any variable remuneration is deferred and adjusted to take account of longer-term performance;
    • a description of the variable remuneration plans applicable to specified roles; and
    • how the consequences of poor remuneration outcomes are managed.

    The disclosure requirements will be proportionate to the size of an entity and the complexity of its remuneration arrangements. Accordingly, "Significant Financial Institutions" (SFIs) as defined under CPS 511, will be required to disclose additional quantitative information including how they have placed material weight on non-financial metrics (such as risk management and conduct) in determining remuneration outcomes, as well as the remuneration outcomes for the Chief Executive Officer, other key executives and material risk-takers.

    APRA intends that the new disclosures will allow entities to demonstrate to external stakeholders the strengthening of their remuneration practices in line with the requirements in CPS 511.

    Reporting requirements

    Draft CRS 511.0 will require all entities to report specified qualitative and quantitative remuneration data, in a specified reporting template, to APRA including:

    • details of Board oversight and approval of the remuneration policy, including consultations with risk;
    • where applicable, variable remuneration design and adjustments;
    • information about specified role(s) as defined in CPS 511; and
    • where applicable, variable remuneration outcomes for specified roles.

    APRA's objective in introducing CRS 511.0 is to ensure that its data collection supports its supervisory activities and prudential decision-making.

    Publication of centralised remuneration statistics

    APRA intends to use the data it collects to publish centralised remuneration statistics. This will facilitate comparison of remuneration outcomes and promote greater transparency across the industry. APRA specifically notes that there has been a loss of trust in financial entities, as highlighted by the Royal Commission, and emphasises the ongoing need for accessible and clear information.

    When are these changes proposed to take effect?

    APRA has proposed that the new remuneration disclosure and reporting requirements will take effect consistently with the staggered implementation of CPS 511 by entity size and industry. This means that the requirements would apply as follows:

    • 1 January 2023: ADIs that are SFIs;
    • 1 July 2023: insurance and RSE licensee entities that are SFIs; and
    • 1 January 2024: all other APRA-regulated entities.

    What is APRA seeking feedback on?

    Key issues that APRA is seeking feedback on include:

    • whether the proposed disclosures will provide information sufficient to support greater transparency and market discipline in remuneration practices;
    • whether any additional items should be disclosed or, alternatively, whether any items identified should not be disclosed;
    • implementation challenges of the disclosure proposals;
    • whether there are any systems or implementation challenges to reporting remuneration data;
    • whether APRA's proposed publication of statistics will sufficiently enable comparability of remuneration outcomes; and
    • what other remuneration data APRA should publish for all entities.

    ADI public disclosures


    On 6 July 2022, APRA also released for consultation proposed amendments to APS 330 which requires locally-incorporated ADIs to publicly disclose key prudential information about their risk profile and capital position. The discussion paper and draft APS 330 can be found here.

    As with the remuneration proposals, the changes aim to promote greater transparency and accountability among ADIs. They also respond to previous feedback from market participants that ADI disclosures are complex and difficult to use for analysis.

    What is being proposed?

    The proposed amendments to APS 330 are outlined below:

    Alignment with international standards and new bank capital framework

    Since APS 330 was last updated in 2018, the Basel Committee has updated their Pillar 3 disclosure framework to align with the final Basel III framework for prudential regulation of banks. APRA has proposed amending APS 330 to incorporate the Basel Committee's disclosure requirements by reference. This will allow APS 330 to align with the updated international standards as well as APRA's new ADI capital framework. Under the revised framework, ADIs will be required to disclose a broad range of prudential information to assist stakeholders with assessing an ADI's risk profile and capital position.

    Centralised publication of risk metrics

    APRA has proposed introducing a new centralised dashboard of prudential metrics which compiles key prudential data points on the risk profile and capital position of all locally-incorporated ADIs.

    Similar to the remuneration disclosure proposals, APRA intends that this will facilitate access to high quality prudential information, enabling market participants to compare and evaluate an ADI's risk profile effectively.

    Additionally, APRA has also proposed bringing forward the requirement for IRB ADIs to disclose their capital floor to enhance comparability across banks. This would apply from 1 January 2023 to align with the implementation of the new ADI capital framework.

    Removal of disclosure requirements for small ADIs

    APRA has proposed removing disclosure requirements for smaller ADIs and to only apply these to SFIs. Instead, it will rely on the centralised publication of risk metrics outlined above to promote transparency for the smaller ADI cohort of the industry. This proposal aims to promote proportionality and simplicity in APRA's public disclosure standard.

    As a consequential amendment, APRA is proposing to bring forward the removal of public disclosure requirements for non-SFI ADIs to 1 January 2023 to align with the new capital framework.


    When are these changes proposed to take effect?

    APRA seeks to finalise APS 330 in 2022, enabling ADIs 12 months to implement the requirements before the effective date of 1 January 2024.

    What is APRA seeking feedback on?

    Key issues that APRA is seeking feedback on include:

    • the best format of public disclosures to support market discipline;
    • whether APRA should consider publishing any additional quantitative or qualitative information in its proposed centralised publication; and
    • whether the amendments to draft APS 330 encompass an appropriate set of minimum amendments to the Basel Committee's disclosure requirements in the Australian context.

    What now?

    Both consultations will be open until 7 October 2022. APRA will then review industry feedback with a view to finalising both the remuneration disclosure and reporting requirements under CPS 511 and draft APS 330 by the end of 2022.

    APRA-regulated entities should review the proposed amendments, consider how they may apply and determine what impact they will have on their existing disclosure frameworks. Submissions can also be made to APRA on these matters to highlight any concerns or suggestions for better implementation.

    Author: Daniel Fawcett, Senior Associate; Vivien Lin, Graduate.