APRA releases final package on disclosure of composition of capital and remuneration

The Australian Prudential Regulation Authority (APRA) today released a response paper and a final Prudential Standard APS 330 Public Disclosure relating to Pillar 3 disclosures on the composition of capital and on remuneration by authorised deposit-taking institutions (ADIs) in Australia.

These disclosure requirements form part of APRA’s implementation of the Basel III capital reforms released by the Basel Committee on Banking Supervision in December 2010. They are intended to improve market discipline and the transparency of regulatory capital and remuneration. The prudential standard was released in draft form in April this year.

As part of these measures, ADIs will be required to disclose:

• additional information on their capital adequacy;
• full details of the terms and conditions of each regulatory capital instrument; and
• a reconciliation between their regulatory capital and financial statements.

These disclosure requirements will, among other things, inform the market of the composition of ADIs’ regulatory capital in a standard form that will allow market participants to compare the capital of banking institutions within and across jurisdictions.

In addition, ADIs will be required to disclose qualitative and quantitative information about their remuneration practices and aggregate remuneration data for senior managers and material risk-takers. APRA had foreshadowed these requirements, which take account of the Financial Stability Board’s Principles for Sound Compensation Practices (2009) and implement the Basel Committee’s Pillar 3 disclosure requirements for remuneration (2011), in a letter to ADIs in October 2011.

The disclosure requirements commence for the first reporting period on or after 30 June 2013.

The package released today can be found on the APRA website.