The Financial Accountability Regime (FAR) is a regulatory framework aimed at improving accountability at senior levels within Australia’s financial sector, including banks, insurance companies, and superannuation firms. Here is a summary of what directors need to know about FAR:
- There are Four Core Sets of Obligations:
- Accountability Obligations: Entities and senior staff must conduct business responsibly, upholding high standards.
- Key personnel Obligations: Assign clear responsibilities to directors and senior executives for all operational areas.
- Notification Obligations: Entities must inform regulators about key operational and personnel details.
- Deferred Remuneration Obligations: Minimum 40% of variable remuneration to be deferred for a minimum of 4 years, with policies to reduce variable remuneration for non-compliance.
- Joint Oversight: FAR is jointly administrated by Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) with ongoing supervisory and surveillance activities.
- Beyond the Entity: The regime’s reach extends to Significant Related Entities (SREs), emphasising the importance of systemic oversight across subsidiary and affiliated entities that significantly influence the financial health of the accountable institution.
- Smooth Transitioning: For entities previously under the Banking Executive Accountability Regime (BEAR), FAR outlines clear transitional guidelines to navigate the shift.
The Financial Accountability Regime (FAR) for the banking industry is set to commence on 15 March 2024. APRA and ASIC acknowledge that with the Minister Rules still being finalised, institutions might need extra time to comply, especially regarding the registration of new accountable persons and notification obligations. See their advice HERE.
The responsible minister is Financial Services Minister Stephen Jones.
The delay impacts regulatory clarity and preparation across the banking, superannuation, and insurance sectors, with significant penalties for breaches and implications for senior executive accountability and remuneration policies.
Entities are expected to submit their registration applications and notifications by 30 June 2024. Further details, including Regulator Rules and reporting instructions, will be provided following the, ahem, release of the Minister Rules.© Guerdon Associates 2024 Back to all articles