Top Aussie bankers targeted in pocket
Battered by a series of scandals, banks face financial crackdown
Australia’s top bankers including Andrew Thorburn, Shayne Elliott and Brian Hartzer would have almost half of their pay deferred for four years under proposed laws to clean up the country’s scandalridden financial services industry.
Executives and board members earning A$500,000 ($537,000) or more will have to defer a portion of their remuneration under the Banking Executive Accountability Regime Bill announced by Treasurer Scott Morrison. Slated to start next July, the measures will demand greater clarity on the accountability obligations of banks and their key personnel, and bolster penalties for breaches.
Battered by a series of scandals, banks have been trying to head off calls by opposition lawmakers for a wide-ranging inquiry into the sector, and fight back against the government’s decision to hit them with a A$6.2 billion levy.
The Australian Prudential Regulation Authority will have stronger powers under the draft legislation, including the ability to seek civil penalties of as much as A$210 million when standards of behaviour aren’t met, according to a 33-page explanatory memorandum.
“This is imperative to maintain community confidence that the banking sector will serve the interests of consumers and businesses,” Morrison said on Friday, adding that submissions in response to the bill are due by September 29.
The Australian Bankers’ Association is calling on the government to extend the seven-day consultation period.
“Banks want to work with the federal government to get this right, but just seven days to consult is not good enough,” said Anna Bligh, the association’s chief executive.
“This is a significant piece of reform that impacts on the integrity of banks and the stability of the financial system, and it needs thorough scrutiny.”
The new law would create a new definition of an “accountable person” — a board member or senior executive with responsibility for management or control over a significant part of a bank — who would require registration with banking authorities.
Bank chief executives are among the highest-earners in Australia, a report by the Australian Council of Superannuation Investors showed last month. Even still, scandals have been breaking out since 2014, including a finding of systematic misconduct in Commonwealth Bank of Australia’s financial advice division; allegations that lenders including National Australia Bank, ANZ and Westpac tampered with the bank-bill swap rate — the Australian equivalent of Libor, which the banks have denied; and charges that banks hadn’t passed on the full benefit of interest-rate cuts to customers.
Commonwealth Bank’s Ian Narev, 50, received a A$2.86m short-term bonus in the year ended June 2016, as part of total remuneration of A$12.3m, according to the lender’s annual report. Narev, along with other senior executives, was stripped of his bonus, the bank said last month, amid allegations the bank failed to stop or report money laundering by criminals. The move contributed to Narev’s total pay falling to A$5.5m in the fiscal year ended June 30, 2017. Narev, who was raised in Auckland, will step down from Australia’s largest lender by the end of June next year.
Shayne Elliott, the New Zealander who took over as ANZ chief executive in January last year, was paid a base annual salary of A$2.1m in 2016, according to the bank’s latest annual report. In addition, he receives annual and long-term variable bonuses, with about half of the total target remuneration allocated as shares deferred equally over four years, and performance rights deferred over three years, which remains at risk until vesting date.
National Australia’s Andrew Thorburn received a cash salary of A$2.36m as part of total remuneration of A$6.71m in the 2016 fiscal year, according to the bank’s latest remuneration report. That was a 22 per cent increase over the previous year’s A$5.48m.
Westpac’s Brian Hartzer’s total remuneration increased to A$6.75m in the year ended September 30, 2016, from A$5.74m a year earlier, according to the Sydney-based lender’s latest annual report.
The 50-year-old’s fixed pay increased to A$2.77 million from A$2.41 million.
Under the bill, an accountable person who is the CEO of a large bank will be required to defer the lesser of 60 per cent of variable pay or 40 per cent of total remuneration for a minimum of four years.
An accountable person, who isn’t a CEO, at a large bank would be required to defer the lesser of 40 per cent of variable pay or 20 per cent of total remuneration for the financial year.
An executive with critical responsibilities at a smaller bank would be required to defer the lesser of 40 per cent of variable pay or 10 per cent of total pay unless the consideration in question is less than A$50,000.