The Government’s Banking Executives Accountability Regime (BEAR) has been rapidly progressing since first mentioned in the May Budget. After consultation on the exposure draft (see HERE), stakeholders were only given one week to review and make further submissions on the proposed Bill. There now appears to be at least some slowing of the pace in response to stakeholder concerns. The Senate’s Economics Legislation Committee has reviewed the Bill and recommended it be passed but with a commencement date not less than 12 months after the Bill is passed – rather than the proposed 1 July 2018. The Committee referred to several submissions, but apart from the implementation date, did not take on board any other suggestions, including the Green’s recommendation that executive pay be capped. See the Committee’s report HERE.

To recap, on 19 October the Senate referred the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 (see HERE) to the Economics Legislation Committee for review and reporting by 24 November.

Since there will now be a Royal Commission into the conduct of the banks (see HERE), many of the comments of the Labor and the Green Senators are less relevant.

The most significant findings and recommendations from the Committee are:

• the Committee “recommends that the Bill be amended to change the date of implementation of the BEAR to start not less than 12 months after the Bill is passed. In addition, the committee believes that the government should give consideration to phasing in the BEAR implementation for smaller Authorised Deposit-taking Institutions (ADIs).

• The Committee said in relation to the scope of the BEAR that “While the BEAR is a welcome and important start, the Committee believes that, in time, heightened accountability obligations should be extended to non-ADI firms in the financial sector and also to matters that affect consumer outcomes (as has been done in the United Kingdom)”.

This latter recommendation is not unexpected as it has been widely noted that the BEAR is likely to create distortions in the market for talent between ADI and non-ADI organisations. To an extent this will be addressed as APRA extends coverage of some BEAR elements to non-ADIs through its current regulatory powers (see last paragraph of APRA submission HERE).

As Parliament has now risen for the year, progress of the Bill will be in the new year. Guerdon Associates will keep you informed.

 

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