In revising its prudential standards and guidance about the design and implementation of remuneration systems, APRA should:
- require APRA‑regulated institutions to design their remuneration systems to encourage sound management of non‑financial risks, and to reduce the risk of misconduct;
- require the board of an APRA‑regulated institution (whether through its remuneration committee or otherwise) to make regular assessments of the effectiveness of the remuneration system in encouraging sound management of non‑financial risks, and reducing the risk of misconduct;
- set limits on the use of financial metrics in connection with long‑term variable remuneration;
- require APRA‑regulated institutions to provide for the entity, in appropriate circumstances, to claw back remuneration that has vested; and
- encourage APRA‑regulated institutions to improve the quality of information being provided to boards and their committees about risk management performance and remuneration decisions.
The Government supports APRA acting on this recommendation.