The Coalition government plans to crack down on executive pay in the banking industry by giving the regulator power to cap salaries and delay bonuses by years.
The move has been resisted by the major banks, but Malcolm Turnbull has said he will push ahead regardless, in light of the latest money-laundering scandal engulfing Commonwealth Bank.
The prime minister plans to introduce measures to prevent bonuses being paid all in one hit and wants 40% of the so-called “variable remuneration” for executives working for banks, building societies and credit unions, to be deferred for a minimum of four years. The government wants that figure to be 60% for more senior executives, such as CEOs.
Turnbull said on Tuesday the plan was “modelled on measures that were taken in the United Kingdom”.
Under the proposed legislation, the banking regulator, the Australian Prudential Regulation Authority, would be given greater powers.
Apra would be able to force bank boards to adjust their remuneration policies if they produce inappropriate outcomes, to push directors out of the industry for bad behaviour, and to force all senior executives in the banking industry to register with the regulator so it can keep records of their behaviour.
The move comes after the Commonwealth Bank board announced its embattled chief executive, Ian Narev, would step aside next year.
Commonwealth Bank is still dealing with the fallout from claims it committed “serious and systemic” violations of laws designed to combat the funding of terrorism, stretching back to 2015.
Narev took home more than $12m in pay last year, and the bank unveiled a record $9.9bn profit earlier this month.
The treasurer, Scott Morrison, said Commonwealth Bank still had “a lot of work to do” to amend for the current scandal, and there would be “further announcements” from government about it.
He said the government would introduce tougher legislation “in the next few weeks” to crack down on executive salaries and dodgy executives.
“The banking executive accountability regime (Bear), which I’ll be introducing into the parliament in the next few weeks and months, that regime puts accountability back in the senior levels of our banking system,” Morrison told the ABC on Monday.
“You can’t go around and make decisions that affect the lives of millions of Australians and just walk away.”
The government released its crackdown plans in its 2017-18 budget in May, and Treasury released a consultation paper in July explaining the plans in detail, but this is the first time the government will try to introduce the plans to parliament.
The plans have been resisted by the major banks in submissions to Treasury.
Michael Sukkar, the assistant minister to the treasurer, said the government did not want bank executives making short-term decisions that affected their remuneration, and Australians expected a high standard of decision-making when bankers were remunerated well.
“Often those decisions are not in the best interests of the company in the long-term,” Sukkar told Sky News on Tuesday.
Labor is still calling for a royal commission into the banking industry.
The shadow minister for employment, Brendan O’Connor, told Sky News on Tuesday that not a week had gone by without another crisis hitting the banking sector.
“This has gone on for far too long ... clearly, there are some systemic problems in the sector which can only be dealt with by a proper investigation with the power of the royal commission,” he said.
with Australian Associated Press
