(c) the time necessary for the outcomes (c) the time necessary for the outcomes of those business activities to be reliably measured.

(c) the time necessary for the outcomes of those business activities to be reliably measured.

38. The Remuneration Policy must provide for the Board or, for a foreign ADI, the senior officer outside Australia, to adjust performance-based components of remuneration downwards, to zero if appropriate, in relation to persons or classes of persons, if such adjustments are necessary to:

(a) protect the financial soundness of the regulated institution; or

(b) respond to significant unexpected or unintended consequences that were not foreseen by the Board Remuneration Committee or, for a foreign ADI, the senior officer outside Australia.

39. The Remuneration Policy must set out who is covered by the Policy. The Remuneration Policy must cover, as a minimum:

(a) each responsible person, as that term is defined in APS 520, excluding responsible auditors, non-executive directors and, in the case of a foreign ADI, the senior officer outside Australia;

(b) persons whose primary role is risk management, compliance, internal audit or financial control (collectively “risk and financial control personnel”); and

(c) all other persons for whom a significant portion of total remuneration is based on performance and whose activities, individually or collectively, may affect the financial soundness of the institution.

A person will be included within one of the above categories if that person is: employed directly by the regulated institution; retained directly by the regulated institution under contract; employed by, or a contractor of, a body corporate (including a service company) that is a related body corporate of the regulated institution; or, subject to paragraph 40, an entity that is not a related body corporate of the regulated institution.

40. The Remuneration Policy must cover a service contract between a regulated institution and an entity that is not a related body corporate of the regulated institution, if:

    (a) the primary role of the entity is to provide risk management, compliance, internal audit or financial control services to the regulated institution; or (b) the services provided by the entity, either individually or collectively with like services provided by other entities, may affect the financial soundness of the regulated institution and, under the services contract with the regulated institution, a significant portion of the total payment to the entity is based on performance.

However, the Remuneration Policy need not cover a service contract with such an entity if:

(i) the regulated institution’s risk management framework explicitly addresses the structure of payments to entities of the relevant kind and the risk that payment incentives can give rise to inappropriate behaviour; and