APRA on its draft Prudential Practice Guide on Remuneration

Friday, 23 July 2021

The AICD has made a submission to APRA on its draft Prudential Practice Guide on Remuneration (PPG 511). This sits under the yet to be finalised Prudential Practice Standard on Remuneration.

The AICD is supportive of APRA’s objective to engage in stronger supervision of remuneration frameworks and focus on non-financial risk management. We support the more principles-based focus of the Practice Guide, which reflects amendments made to the Prudential Standard.

While broadly supportive of the Practice Guide, and its distinction between the role of management and the board, our submission made the following points:

  • we welcomed the clarification that entities may choose not to offer variable remuneration and recommend that, if there are any additional requirements, they be specified;
  • the wording on the role of the board in paragraph 56 should more clearly reflect the oversight role of the board;
  • the Guide should make clear that boards may delegate decisions on risk and conduct adjustments given the board’s governance and oversight role;
  • the implementation date of both the Standard and the Practice Guide should be the performance year commencing on or after 1 January 2023;
  • further specific consultation should take place with ADIs over the practical limitations of their ability to oversight mortgage broker remuneration arrangements via approved aggregators.

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