Client alert

CPS 511 brings changes to remuneration disclosure obligations for APRA-regulated entities

This week, the Australian Prudential Regulation Authority (APRA) finalised new requirements to Prudential Standard CPS 511 Remuneration, which will significantly impact authorised deposit-taking institutions (ADIs), insurers, and superannuation entities.

After thorough consultation that began in 2019, this new standard requires APRA-regulated entities to publish details around their remuneration frameworks, design, governance, and outcomes. These changes come in an effort to create more transparency and improve risk management, in particular in the context of the poorly designed and executed remuneration frameworks exposed through the financial services Royal Commission.

To adhere to these updated disclosure obligations, a remuneration framework will need to be established or updated in line with your business plan, strategic objectives, and risk management framework. It should outline how you manage financial and non-financial risks, ensure sustainable performance, and support long-term stability.

Reporting under this new standard will begin for all entities from their first full financial year following 1 January 2024, and will be required on an annual basis. For those with a 30 June year end, reporting will commence from 30 June 2025. For larger and more complex entities, there will be additional requirements including reporting information about payments to top executives and sharing details on non-financial measures such as risk management in remuneration decisions.

To ensure the implementation process is smooth, the first disclosure will only need to be submitted to APRA within six months of your financial year-end. In addition, APRA will soon publish findings from the implementation review of CPS 511 to ensure ADIs and other regulated entities can take away some learnings and gain a better understanding of their obligations.

While CPS 511 primarily focuses on remuneration, it aligns with overlapping requirements from the Financial Accountability Regime (FAR). To drive efficiencies, we encourage you to consider implementing both regulatory changes at the same time.

As the 1 January 2024 implementation deadline approaches, now is the time to familiarise your business with the implications of the changes to ensure frameworks are put in place to support compliance. Find out more on the APRA website.

To ensure that you implement these changes correctly and meet all obligations, please don't hesitate to reach out to our team of experts.

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