APRA has released a discussion paper on its new prudential standard on remuneration (CPS 511).
The standard will operate alongside and supplement the Banking Executive Accountability Regime (BEAR) requirements for Authorised Deposit-Taking Institutions (ADIs) and the future legislative equivalent for Registrable Superannuation Entity (RSE) licensees, life, general and health insurers. It will have far-reaching implications for variable remuneration structures across all APRA-regulated entities.
APRA has indicated it will mandate an expanded range of responsibilities in relation to the remuneration framework, so Boards and Remuneration Committees will need to take note and act.
What's being proposed?
In summary, the following is being proposed:
APRA is seeking submissions by 23 October 2019. A prudential practice guide and reporting and disclosure standards will be developed for consultation in early 2020.
CPS 511 is expected to commence on 1 July 2021, with a deferred commencement date for the private health insurance industry.
How this will impact APRA regulated entities
Regulated entities should review their existing remuneration frameworks so that any new arrangements and practices are consistent with the spirit and intent of the new standard once the final version is released.
As summarised above, the proposed CPS 511 APRA Prudential Standard CPS 511 Remuneration will require significant changes to remuneration arrangements across APRA-regulated entities, including:
This means that APRA-regulated entities will need to:
ADI entities need to consider CPS 511 in the context of the BEAR framework. Further, there are added complexities for RSE licensee, life, general and health insurer entities given that they are awaiting details of the BEAR equivalent to be legislated.
Accountability statements and the accountability map may require updating if responsibilities change as a result of implementing the new prudential standard.
How Centium can help
Centium can help regulated entities prepare by reviewing their existing remuneration frameworks to ensure they are consistent with the spirit and intent of the new standard once the final version is released. We can also help with the drafting / redrafting of accountability statements.
For more information, please contact Penny Corkill, Director. Penny is an experienced HR & OD professional and qualified internal auditor