Treasury eyes bank exec crackdown loophole

Treasury says it's looking at how to stop banks from adjusting executive base pay rates to get around a crackdown on bonuses.

The federal budget proposed a new regime which would regulate senior banking executives' salaries and bonuses.

The Australian Prudential Regulation Authority would be empowered to change remuneration policies, ban executives and impose penalties of up to $200 million for misconduct.

A minimum 60 per cent of chief executive bonuses and 40 per cent of other senior executive's bonuses would be deferred for at least four years.

Labor senator Chris Ketter asked Treasury officials on Tuesday what would happen to a bank which simply increased the base rate of pay for executives to make up for reduced bonuses.

Treasury deputy secretary John Lonsdale said the issue was considered when the policy was put to the government.

"APRA will be conducting a review around some of the issues here and we will certainly be thinking more about it," Mr Lonsdale said.

He said there had been some discussions between the Treasury secretary John Fraser with major banks before the budget announcement, but technical issues still needed to be worked through.

A consultation paper is to be released in coming months, followed by draft legislation.