Currently the Banking Executive (BEAR) is in force, requiring bank management to be accountable for specific outcomes and have part of their variable remuneration deferred and subject to cancellation from excessive risk taking, misconduct, or inappropriate outcomes. The Financial Accountability Regime (FAR) is a replacement law being considered that goes beyond banks and is applicable to a broader range of ASIC and APRA regulated financial services companies. The law has done the rounds of parliament, where it sits pending the outcomes of the May federal election.
The Senate Economics Legislation Committee recently issued a report in which it gave the Financial Accountability Regime Bill its seal of approval. Based on this report, whichever party wins the election, it is still likely to proceed.
A summary of the main points include:
- In light of FAR superseding the Banking Executive Accountability Regime (BEAR), the committee noted that organisations that have implemented the requirements under BEAR or have made arrangements to do so, are not required to make significant changes. Rather, where specific policy changes are required by FAR, existing BEAR-focused implementations should be changed accordingly. FAR was designed with the aim of being broadly consistent with the requirements of BEAR.
- The committee did not see the need to recommend the addition of senior managers to be included as part of FAR. Doing so would bring it more in line with the UK Senior Managers Regime.
- There is no expectation for accountable persons to micro-manage everyone under their purview. Instead, accountable persons are required to have in place a process through which their accountabilities can be discharged effectively.
- Reasonable steps to be taken must be defined by the entity in questions, as each entity will have its own unique set of issues that need addressing. These entities will vary by size, industry, complexity among others.
- APRA was clear to make a distinction that while there are laws clearly in place currently to penalise an entity for its conduct, FAR, on the other hand, readily identifies the accountability of a person. Where a misconduct has been identified, the accountable person will be identified, although there may not have been a breach of FAR.
- Deferred remuneration requirements are consistent under FAR and APRA’s CPS 511. Under CPS 511 though, significant financial institutions (SFIs) are required to defer remuneration for longer. We have previously explained this and other remuneration-related issues under FAR and CPS 511 HERE and HERE.
The full report can be found HERE.
The Bill as it stands can be found HERE.© Guerdon Associates 2024 Back to all articles