APRA and ASIC have released key material for consultation to support the implementation of the Financial Accountability Regime (FAR).

The FAR will replace the Banking Executive Accountability Regime (BEAR) which came into effect in 2018. The FAR will apply to ADIs six months after the Financial Accountability Regime Bill 2023 receives Royal Assent, and to insurance and superannuation entities 18 months following Royal Assent. The Bill is currently before the Senate and, while there is no certainty that the Bill will be considered and passed in these August sittings, if it is passed, then the earliest the FAR will apply to ADIs will be late February 2024.

The documents released for consultation include proposed Regulator rules, Transitional rules (from the BEAR) and ADI key functions.

The term “key functions” has a different meaning than under the BEAR. Under the FAR, the ADI key functions are prescribed by the Regulator rules and each key function must be assigned to at least one accountable person. The identification details of that person and their accountabilities will be included in the organisation’s Register of accountable persons.

The proposed ADI key functions are:

1. Capital management
2. Collections and enforcement (default, debt collections, and recovery)
3. Conduct risk management
4. Credit risk management
5. Data management
6. Financial and regulatory reporting
7. Financial services regulatory engagement
8. Hardship processes
9. Liquidity and funding management
10. Market risk management
11. Monitoring representatives and staff—financial or credit products/services
12. Operational risk management
13. Product design and distribution obligations
14. Product origination
15. Recovery and exit planning and resolution planning
16. Risk culture
17. Scam management
18. Technology management
19. Training of relevant staff and representatives—financial products/services/credit activities
20. Whistleblower policy and process.

ADIs have discretion about which key functions are assigned to which accountable persons, as long as it reflects actual practices. One accountable person may have no key functions assigned to them, while another accountable person may have multiple key functions.

The Regulators are seeking feedback/consultation from stakeholders on:

• The proposed list of data items and the ADI key functions within the draft Regulator rules, and supporting detail about the ADI key function descriptions;
• The proposed list of data items within the draft Transitional rules;
• The compliance impact of the proposed changes; and
• Any other substantive costs associated with the changes.

APRA and ASIC will consult on the list of specific key functions for insurance and superannuation entities in due course. However, those entities may wish to have regard for the key functions specified for ADIs and commence early work on accountability mapping.

Submissions are open until 17 August 2023. The documents for consultation can be found HERE.

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