Bank chiefs may face pay quarantine

TOP bank executives in Australia may be forced to defer part of their pay for four years in case misconduct is detected as the Federal Government looks to ramp up pressure on the scandal-ridden and unpopular banking sector.

Draft legislation released by the Government late on Friday will require a chief executive at a major bank to defer either 60 per cent of variable pay or 40 per cent of total remuneration — whichever is lower — for a minimum of four years.

A top executive at a smaller bank will be required to defer the lesser of 40 per cent of variable pay or 10 per cent of total pay.

The deferred pay will ensure the executive’s variable pay will remain at risk in case they are found to have failed accountability obligations.

The Banking Executive Accountability Regime legislation is part of measures flagged by Canberra in the federal Budget as it seeks to improve accountability in the banking sector.

It comes amid several investigations, including by APRA and ASIC, into allegations against Commonwealth Bank related to breaches of anti-money laundering and counterterrorism funding laws.

The regulators have also repeatedly flagged major problems with the culture and conduct of all the big banks, forcing the Government to impose controls amid calls for a royal commission into the sector.