BEAR (now FAR) – the extension of the Banking Executive Accountability Regime

On 4 February 2019, the Morrison Government announced it would implement recommendations 3.9, 4.12, 6.6, 6.7 and 6.8 of the Financial Services Royal Commission to extend the Banking Executive Accountability Regime (BEAR) to all APRA-regulated entities e.g. banks, insurance and superannuation firms and provide joint administration to ASIC as the conduct regulator.

On 22 January 2020, The Treasury released the Government’s proposed model. The consultation time for the extended BEAR – now to be called the “Financial Accountability Regime” (FAR) (not the “Financial Executive Accountability Regime” or FEAR as some had hypothesized) – is very short.

On 14 February 2020, the consultation period will close.  Affected entities need to consider whether they wish to make a submission now.  The draft legislation will be introduced to Parliament by the end of 2020.  After the consultation period ends, affected entities then need to start preparing for the implementation of FAR.  This will include an analysis of governance frameworks to determine the likely accountable person population and their key responsibilities. Banks will need to revisit their BEAR frameworks. In our experience, undertaking this regulatory change project can prove to be unexpectedly time-consuming.

The changes proposed by the Government with the FAR regime are significant and include:

• APRA will be able to veto director and senior executive appointments.
• 40% of all variable remuneration is to be deferred for a minimum of 4 years, unless it is under $50,000 p.a.
• Additional prescribed responsibilities, including senior executive responsibility for breach reporting, dispute resolution and “setting of incentives”.
• An additional personal conduct obligation, being the need to take “reasonable steps” to ensure that the entity complies with its “licensing obligations”.
• Individuals face disqualification and civil penalties ($1.05M) if they breach their obligations.
• APRA and ASIC will administer the new regime.

In this briefing, we summarise the key points of the Government’s proposal, provide initial analysis and practical guidance to assist affected entities.

Click here to download the full article.

Authored by:

Matt Bode, Partner