The Australian Prudential Regulation Authority (APRA) has released the final guidance for the new prudential standard CPS 511 Remuneration (CPS 511), commencing early 2023.
CPS 511 was designed to strengthen remuneration practices across APRA-regulated entities by introducing heightened requirements on remuneration and accountability to create more balanced incentive structures, promote financial resilience, and support better outcomes for customers.
Meanwhile, the Prudential Practice Guide CPG 511 Remuneration (CPG 511) aims to assist banks, insurers, and superannuation licensees in complying with CPS 511 by setting out guidance and examples of better practice for:
“Effective implementation of CPS 511 will strengthen the resilience of the financial sector and rein in the kinds of poorly designed remuneration practices that have damaged community trust and prudential soundness in the past,” said APRA Deputy Chair John Lonsdale.
The finalisation of CPG 511 follows a consultation on draft guidance in April 2021. In response to industry feedback, APRA has aligned the guidance with the government's proposed Financial Accountability Regime (FAR) and provided additional examples of better practice.
CPS 511 will come into effect on January 01, 2023, for the largest and most complex ADIs and on a staggered basis for other entities.
APRA advised banks, insurers, and superannuation licensees to prepare as soon as possible to ensure they are ready to comply with the new requirements.
“This prudential practice guide should be essential reading for entities looking to make sure they understand their legal obligations under the new standard. APRA is also increasing its supervisory oversight of remuneration practices ahead of the implementation of CPS 511 to ensure appropriate preparations are being made,” Lonsdale said.
APRA also expects to release new reporting and disclosure requirements on remuneration for consultation in 2022.
