Australian Bankers’ Association's initial response to APRA's Prudential Standard on remuneration

Sydney, 29 May, 2009: The Australian Bankers’ Association (ABA) welcomed the consultation on the Australian Prudential Regulation Authority’s (APRA) Prudential Standard on remuneration.

APRA’s principles aim to ensure a bank’s remuneration policies are aligned with the bank’s risk management policy. Australian bank boards and executives have been very effective in implementing policies to control risk. Australia has one of the safest banking systems in the world.

For example, of only 12 private banks in the world with AA or higher credit ratings, Australia has four. Australian banks produced strong results throughout the financial crisis. And unlike many countries, no taxpayer money has been spent supporting our banks.
 
Notwithstanding this sound record, if there are sensible ways of improving risk management through imposing remuneration principles by legislation, then the ABA will support them.

The ABA intends to make a submission to APRA (submissions are due by 24 July).
 
At first reading, the ABA fully endorses the principle of requiring boards to take responsibility and be accountable for remuneration policies. This is already a key principle, and there is no downside in enshrining it in a prudential standard.

One initial concern is that the proposed standard requires the Board’s Remuneration Committee to recommend remuneration for a wide range of bank employees: key management personnel, risk and financial control personnel, and all other employees who have significant variable remuneration. Given the size of some banks, there is a question of whether this is requirement might be difficult, in practice, to implement.

For further information:

Heather Wellard
Director, Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
           
ENDS