An excess focus on return measures and lacklustre reviews by boards of the pay arrangements for their bank's most senior staff feature in an APRA review of remuneration practices, released yesterday."We are keen for industry participants to take up the challenge of improving themselves, as some are already doing, rather than waiting to be told what to do," APRA chief Wayne Byres said in speech to a Sydney finance forum. The conclusions of this review add to the list of acute matters chewing through the time of boards of Australia's biggest banks.The review found "remuneration frameworks and practices did not consistently and effectively promote sound risk management and long-term financial soundness, and fell short of the better practices set out in APRA's existing guidance."Byres used his address at the AFR Banking & Wealth Summit to impress upon the industry's custodians the gravity of the topic.At an industry level, APRA's findings were, "from a prudential perspective, a major concern," Byres said."The pressure within large financial institutions to sustain their strong financial performance is immense. That is why it is important that more is done to better reflect the extent of risk-taking, and long-term outcomes, in measures of performance. "The results of our review point to a range of areas where the financial sector has considerable room for improvement in the way it determines how its executives are rewarded," he said. "If there appear to be no consequences at senior levels for poor risk outcomes, it undermines sound risk management and the long term financial health of the institution," he said."The perception in the community is that in the financial sector, particularly at senior executive level, the carrots are large and the sticks are brittle. Not only are rewards generous, but there are seemingly few repercussions for poor outcomes. "It's in the industry's interests that this perception changes," Byres said.The APRA review sampled records from 12 large institutions, covering 280 senior roles across the ADI, insurance and superannuation sectors covering 2014 to 2016. The regulator reviewed "roughly 800 case studies," Byres said.The APRA chief said that "at its heart, our goal was to assess how well the objective of the prudential framework - that remuneration should be aligned to sound risk management and the long-term financial health of the institution - was being met in practice."The overall results of the review … show considerable room for improvement."Byres explained that "the headline message is that the institutions we reviewed by and large had the required frameworks, policies and processes that could provide the basis for a sound system of remuneration. "But in many cases their practical application left something to be desired."The APRA chief emphasised the lack of strong links between pay for the top brass and the experience of scandals (the media's word, not Byres')."Given Australian financial institutions have on the whole been financially successful, executives have been rewarded accordingly. "But that financial success has not been universal, nor without a number of missteps. Yet there has been limited evidence of material