Legal development

APRA Finalises Requirements For Remuneration Disclosure

ByMiriam Kleiner

17 August 2023

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    What you need to know

    • The Australian Prudential Regulation Authority (APRA) has finalised new requirements for authorised deposit-taking institutions, general insurers and registrable superannuation entity licenses to publicly disclose information on aspects of remuneration paid to certain people in the organisation.
    • Under amended Prudential Standard CPS 511 Remuneration (CPS 511), APRA-regulated entities will be required to publish information annually on their remuneration frameworks, design, governance and outcome.
    • The new requirements are a significant uplift on the disclosures currently required.
    • The new disclosure requirements will commence for all APRA-regulated entities from their first full year following 1 January 2024. Annual disclosures will be required within six months of an entity's financial year-end.

    What you need to do

    • Consider how the updates to CPS 511 may impact your organisation's existing disclosure frameworks and prepare for the new disclosure requirements, including by reviewing decision-making processes and timelines.
    • Ensure compliant information gathering systems and processes are in place so that the information publicly reported is available and accurate.
    • If you are an unlisted or foreign headquartered entity, get ready early to ensure adequate time to prepare for this new reporting regime.

    New disclosure requirements

    The updated CPS 511 incorporates substantive additional disclosure requirements. APRA regulated entities will now be required to disclose the following additional information:

    Topic

    Requirement

    Bonuses and other awards

    Disclose information relating to:

    • guaranteed bonuses;
    • sign-on awards; and
    • termination awards made to persons in the regulated ‘specified roles’.

    Variable remuneration

    Disclose information relating to:

    • the variable remuneration which is paid/vests in respect of a financial year following a downward adjustment;
    • variable remuneration which is deferred in respect of the financial year following a downward adjustment;
    • the total variable remuneration which is adjusted downwards in respect of the financial year; and
    • the reasons for any downward adjustment.

    Remuneration outcomes

    Disclose information concerning remuneration outcomes and variable remuneration awards made in respect of a financial year, regardless of when awarded.

    This requires disclosure of the fixed remuneration, and variable remuneration of persons in the regulated ‘specified roles’.

    Remuneration framework

    APRA regulated entities (including non-SFIs) will be required to disclose detailed descriptions of the policy and procedural settings of the entity’s remuneration framework, including:

    • a description of the positions caught by the regulated ‘specified role’ designation;
    • how variable remuneration is structured;
    • how much ‘material weight’ is placed on non-financial performance measures;
    • the design of variable remuneration;
    • how the award of variable remuneration is aligned to performance and risk outcomes; and
    • how the entity defers and adjusts variable remuneration.

    Author:Miriam Kleiner, Partner; and Saskia Sale, Associate.

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