The BEAR Roars!

The Treasury released the exposure draft of the Banking Executive Accountability Regime, open for consultation until 29th Sept 2017.

The Bill amends the Banking Act to establish the BEAR: an enhanced accountability framework for ADIs and persons in director and senior executive roles.

  • The BEAR imposes a clearer accountability regime on ADIs and people with significant influence over conduct and behaviour in an ADI. It requires them to conduct themselves with honesty and integrity and to ensure the business activities for which they are responsible are carried out effectively.
  • It does this by creating a new definition of ‘accountable person’. An accountable person is a Board member or senior executive with responsibility for management or control of significant or substantial parts or aspects of the ADI group.
  • The general requirement placed on accountable persons is framed in the context of their particular responsibilities. These will be clearly defined in accountability statements for each accountable person and an accountability map for each ADI group.
  • Accountability maps and statements are designed to give APRA greater visibility of lines of responsibility. The maps will clearly allocate responsibilities throughout the ADI group, to ensure that all parts or elements of the group are covered.
  • An ADI must comply with its BEAR obligations. These include new accountability, remuneration and key personnel obligations. An ADI must ensure that it has a remuneration policy consistent with the BEAR, its accountable person roles are filled and it has given accountability statements and maps to APRA.
  • ADIs must set remuneration policies deferring an accountable person’s variable remuneration to ensure accountable persons do not engage in behaviours inconsistent with BEAR obligations.
  • APRA will have additional powers concerning examination and disqualification to let it implement the BEAR.
  • If an ADI breaches its BEAR obligations, significant civil penalties may be imposed by a court.
  • Recognising there are different business models and group structures in the banking industry, the Bill uses both high level principles as well as prescribed detail. The BEAR will work with existing legislative and regulatory frameworks

The ABA were unimpressed in a statement from Anna Bligh, Australian Bankers’ Association Chief Executive:

“The seven day consultation period announced by the Federal Government on new banking executive accountability laws is grossly inadequate and playing fast and loose with a critical sector of the economy.

“The industry recognises that improving senior executive accountability is crucial for customers to have trust in banks.

“Banks want to work with the Federal Government to get this right, but just seven days to consult is not good enough.

“This is a significant piece of reform that impacts on the integrity of banks and the stability of the financial system and it needs thorough scrutiny.

“It’s an entirely new addition to the system of corporate governance in Australia. The Government’s timeframe risks serious unintended consequences.

“The ABA urges the Government to extend the consultation period and do the proper due diligence to ensure that the objective of improving senior executive accountability is met.”

 

Author: Martin North

Martin North is the Principal of Digital Finance Analytics

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