Banking watchdog speaks out on executive pay in Australia

2 March 2010

The chairman of the Australian Prudential Regulation Authority (APRA) has claimed that the banking sector's current system of executive incentives is "not sustainable".

Speaking at a conference in Melbourne, John Laker said that banks should be linking compensation packages more closely with risk and considering claw-back options, ABC News reports.

The fact that the Australian finance industry did not suffer the same "near-death experience" as other countries during the global crisis could lead to a renewed complacence over pay strategies, he warned.

Mr Laker added: "The danger from our point of view is that Australian financial institutions will quickly forget the lessons of 2008 and 2009."

Meanwhile, Hans Hoogervorst of the Financial Markets Authority in the Netherlands said that a lack of government intervention over inflated salaries had caused "a terrible mess" in some countries.

Their comments were made at an event hosted by the Australian Securities and Investments Commission, the nation's corporate regulator.

Established in 1998, APRA is Australia's banking watchdog and oversees institutions holding approximately AU$3.6 trillion (£2.1 trillion) in assets.