BEAR – more legislation on the way

The Australian Treasury has released a draft legislative instrument to support the new Banking Executive Accountability Regime (BEAR).

The BEAR (see HERE) makes Australian banks and their most senior executives and directors accountable for meeting heightened standards of behaviour in line, according to the Federal Government, “with community expectations”. The legislation received Royal Assent on 20 February 2018.

The legislation includes a power for the Minister to make a legislative instrument defining small, medium and large ADIs, in order to set out how particular obligations of the BEAR will apply. Particular elements of the BEAR will apply differently depending on the ADI’s size – these include the date of application of the rules, deferral amounts of variable remuneration and the maximum civil penalty for breaching the BEAR.

The Australian Treasury is seeking the views of stakeholders on the draft legislative instrument. The draft legislative instrument provides that:

  • a small ADI would have less than or equal to $10bn on a three-year average of total resident assets;
  • a medium ADI would have between $10bn and $100bn on a three-year average of total resident assets; an
  • a large ADI would be any ADI with greater than or equal to $100bn on a three-year average of total resident assets.

The legislative instrument goes into the detail of the dates at which total resident assets should be measured, what happens if an ADI does not yet have three years of financials, and how the thresholds between small, medium and large ADIs will be indexed over time. Interestingly, size is determined by a simple average of total assets over 3 years. As many banks are rationalising and streamlining their businesses, one may have thought a time weighted average would be more valid.

Treasury sent this advice on the afternoon of Friday 6 April and seeks responses by 20 April 2018. Fourteen days, including weekends, should be enough time, Treasury think, for a considered response.

Get to it. See the explanatory documents and other materials HERE.

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