The Australian Prudential Regulation Authority (APRA) says finalised guidance for a new remuneration standard developed to rein in poor practices has been released, allowing insurers and other firms plenty of time to put in place required arrangements.

Deputy Chairman John Lonsdale says the standard will strengthen financial sector resilience and addresses poorly designed practices that have “damaged community trust and prudential soundness” in the past.

“With just over a year to go until the new prudential standard takes effect, we expect banks, insurers and superannuation licensees to be preparing now to ensure they are ready to comply with the new requirements,” he said.

“This prudential practice guide should be essential reading for entities looking to make sure they understand their legal obligations under the new standard.”

A sole focus on financial metrics in determining variable remuneration will be unacceptable under the new requirements, with significant additional weight to be placed on metrics such as customer complaints, breaches, and regulatory and audit findings.

The standard will require increased board oversight, transparency and accountability on remuneration outcomes.

The rules come into effect from January 1 2023 for the largest and most complex authorised deposit-taking institutions and then on a staggered basis for other organisations.

The changes are set to take effect for significant financial institutions in insurance from the following July and for all others that the regime captures from January 2024.

The new guide is available here.