Governance experts and investor groups say they are "cautiously optimistic" that APRA will implement the guts of its proposed crackdown on remuneration practices across the financial services industry.The prudential regulator yesterday unveiled a draft standard that, if implemented, would radically alter the way bank and other financial services executives are paid in Australia.The proposed policy, which APRA describes as "materially more prescriptive" than its existing remuneration requirements, calls on boards to give more weight to non-financial risks in the setting of benchmarks for variable pay of senior executives.Under the draft policy, no more than half of a bank executive's variable pay can be assessed against financial performance measures.Instead, directors will have to assess executive performance by giving equal consideration to performance benchmarks such as culture and governance.APRA deputy chair John Lonsdale said it was clear that existing executive pay practices in many licensed entities were "not incentivising the right behaviours"."Remuneration and accountability frameworks play an important role in driving employee behaviour," he said."Where policies are poorly designed, or not followed in practice, companies may incentivise conduct that is contrary to the long-term interests of the company and its customers."In the financial sector, APRA has observed an over-emphasis on short-term performance and a lack of accountability when failures occur, especially among senior management."There are essentially four planks to APRA's executive remuneration reform agenda:•    a requirement for boards to link 50 per cent of variable pay to non-financial measures of performance;•    a minimum deferral period of up to 7 years before variable pay vests;•    provision for boards to recover variable pay for up to 4 years after it has vested;•    boards must actively oversee remuneration policies and confirm to APRA they are being applied in practice.The new policy was drafted in response to the Hayne Royal Commission, which recommended that APRA act to devise pay systems that encourage sound management of non-financial risks and reduce the prospect of misconduct.Lonsdale indicated the new requirements were intended to improve industry standards of accountability and reduce the likelihood of incentives encouraging poor conduct."Limiting the influence of financial performance metrics in determining variable remuneration will encourage executives to put greater focus on non-financial risks, such as culture and governance," he said."Introducing the minimum holding periods for variable remuneration ensures executives have 'skin in the game' for longer, and allows boards to adjust remuneration downwards if problems emerge over an extended horizon."While aspects of the new standard are almost certain to attract criticism and resistance from the Australian Banking Association, governance experts said the reforms had the potential to make senior executives more accountable."APRA appears to be acknowledging for the first time that variable incentives in the financial services sector have not been at genuine risk," said Dean Paatsch, co-founder of governance advisory firm, Ownership Matters."This is only a draft policy - so how it will be implemented is still not clear."But there is room for cautious optimism that APRA is serious."Paatsch said the proposal to defer payment of variable remuneration for up to seven years along