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Australia regulator hints at tougher requirements for financial industry bonuses

Australia's prudential regulator may implement tougher requirements regarding the bonuses of banking and financial services executives, The Sydney Morning Herald reported Oct. 12.

Fahmi Hosain, the Australian Prudential Regulation Authority's head of governance, culture and remuneration, said the body had over the last three years studied the contracts and pay structures of senior executives across banks, insurance companies and superannuation funds to see if bonuses were proportionate to achievements.

APRA also looked into whether companies withheld bonuses for bad behavior and studied "material risk takers" — people outside the senior executive ranks who can impact the financial standing of the institution.

Australia's Department of the Treasury had unveiled a tougher draft legislation designed to strengthen the responsibility and accountability framework for the most senior and influential directors and executives in banks. Under the draft Banking Executive Accountability Regime Bill, a portion of the remuneration of accountable personalities, or senior executives and board members will be deferred for a period of four years.

Hosain said the regulator is in the process of analyzing data from its investigations and will be publishing a paper when this ends. This may result in a change in prudential standards, he added, though no decision has been made.

The reviews come on the back of banking controversies such as allegations faced by Australia's largest lender, Commonwealth Bank of Australia, over its potential breach of the country's anti-money laundering and counter-terrorism financing laws. Among other things, analysts have noted that regulators may need to get tougher on companies that they supervise.