Bank boss bonuses hit
BANK chiefs could have to wait up to seven years for bonuses under new rules being pushed by the banking regulator to shake up the industry’s lucrative pay deals.
Other changes floated include shifting thresholds for executive bonuses from shortterm financial targets to non-financial measures of conduct, culture and customer outcome.
Boards of large financial organisations should be given the power to claw back bonuses for up to four years after they have been paid.
The proposals are in a report on banker pay released by the Australian Prudential Regulation Authority.
The consultation paper, released yesterday, comes as APRA and other regulators try to elevate the importance of governance and compliance in the financial services sector.
APRA said the proposals would “better align” remuneration with the long-term interests of financial players, their customers and shareholders.
The paper follows the Hayne financial services royal commission criticising bank pay structures.
National Australia Bank, Westpac and ANZ were hit with shareholder strikes against their remuneration reports at their 2018 annual general meetings.
Among reforms APRA is proposing is to lift the importance of managing non-financial risks. Financial performance measures, such as profit, would not be able to comprise more than 50 per cent of the performance criteria for banker bonuses.
The regulator wants minimum deferral periods for pay bonuses of up to seven years for senior executives in larger, more complex entities.
Seven-year periods would apply to the chief executives of the largest financial companies such as the big four banks.
Senior executives other than the chief executive that are deemed a “highly paid material risk taker” would face a six-year deferral period.
Boards will have scope to claw back remuneration for up to four years.
APRA deputy chair John Lonsdale said remuneration arrangements are not encouraging the right behaviour.
“Where policies are poorly designed, or not followed in practice, companies may incentivise conduct that is contrary to the long-term interests of the company and its customers,” he said.