Federal government draft legislation will force bank bosses to defer up to 40 per cent of their total pay as part of controls on the sector.
Top bank executives in Australia may be forced to defer part of their pay for four years in case misconduct is detected, as the federal government looks to ramp up pressure on the scandal-ridden and unpopular banking sector.
Draft legislation released by the government late on Friday, will require a chief executive at a major bank to defer either 60 per cent of variable pay or 40 per cent of total remuneration - whichever is lower - for a minimum of four years.
A top executive at a smaller bank will be required to defer the lesser of 40 per cent of variable pay or 10 per cent of total pay.
The deferred pay will ensure the executive's variable pay will remain at risk in case of they are found to have failed accountability obligations.
It comes amid a number of investigations, including by APRA and ASIC, into allegations against Commonwealth Bank related to breaches of anti-money laundering and counter- terrorism funding laws.
The regulators have also repeatedly flagged major problems with the culture and conduct of all the big banks, forcing the government to impose controls amid calls for a royal commission into the sector.
In May Treasurer Scott Morrison announced a surprise multi-billion dollar levy on big banks and said the Australian Prudential Regulation Authority (APRA) would be able to remove and disqualify executives who hid misconduct.
According to the draft legislation, released late on Friday, all senior banking executives on a salary of $500,000 or more will be required to defer a component of their remuneration on a sliding scale based on the size of the bank and the executive's seniority.
The government has sought submissions on the draft legislation by September 29.
The Australian Bankers' Association slammed the proposals, calling them an entirely new addition to the system of corporate governance and criticising the short exposure period.
"The seven day consultation period announced by the federal Government on new banking executive accountability laws is grossly inadequate and is playing fast and loose with a critical sector of the economy," ABA chief executive Anna Bligh said in a statement.
