In last month’s newsletter we offered an alternative to APRA backing financial services companies into a regulatory corner which will not achieve its stated goals (see HERE).

This, and the 74 substantive submissions received that, we gather, do not support APRA’s proposals may explain why we have not seen APRA’s response yet.

Wayne Byres in a lunch address this month indicated that:

“Many large investors and proxy advisors, in particular, have been uncomfortable with what we have proposed largely, I suspect, because they have been very influential in designing current practices to suit their particular interests. At least some Boards have apparently been told that if they change their arrangements to comply with APRA’s requirements, they will be met with protest votes at AGMs.”

Mr Byres signalled that of all the grumbling raised in submissions (with few solutions offered), APRA will be looking at further alternatives around the proposed financial/non-financial measures ratio and long deferral periods.

It looks as though the prescribed 50% “financial measure maximum” will be softened. Mr Byres said that APRA is not locked in to the specific 50% proposal, and certainly recognises there are trade-offs involved, so APRA might be looking at other alternatives. These could include, for example, a higher limit, a narrower definition of ‘financial metrics’, or an alternative way to use non-financial metrics.

It also appears that the prescribed deferral requirements of up to 7 years will be made more flexible. In this, APRA will consider the more nuanced regulatory regimes overseas. The implication is that the regulation will have a lot of exceptions and qualifications in regard to deferral. Lawyers and, ahem, remuneration consultants, would be kept busier.

See the speech HERE .

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