Legislation for the federal government’s Banking Executive Accountability Regime (BEAR) has passed the Australian Senate.
Australian Treasurer Scott Morrison announced on Wednesday that the new accountability framework had passed the Senate, granting APRA new enforcement powers.
Under the BEAR reform, the concept of an “accountable person” is created and defined as a board member or executive with control over management of an authorised deposit-taking institution (ADI) and will need to register with APRA.
Accountable persons will also need to provide APRA with details of their roles and responsibilities, as well as “accountability maps” that clarify lines of responsibility in the ADI business.
“This is an important element of the BEAR. It ensures accountable persons cannot avoid responsibility for problems which happen under their watch,” according to the BEAR draft legislation’s explanatory memorandum.
BEAR will also grant APRA the capacity to penalise ADIs and disqualify accountable persons where they breach obligations under BEAR.
Major authorised deposit-taking institutions (ADIs) will have to comply with BEAR from the 1 July 2018, whereas small and medium ADIs will have another year to comply, commencing 1 July 2019, according to a statement from Mr Morrison.
Small and medium-sized institutions did not have the resources that larger ADIs had and so needed more time to adapt to BEAR, the Treasurer said.
The Customer Owned Banking Association (COBA) welcomed the federal government’s move to allow smaller-scale ADIs more preparation time.
“To promote a more competitive banking market, it is critically important to minimise regulatory costs on smaller banking institutions,” COBA chief executive Michael Lawrence said.
He added that the cost of regulatory compliance ultimately fell on the customer.
Mr Lawrence said: “MPs have also recognised that the regulatory compliance burden is effectively a competitive advantage for the major banks. This is because major banks have vastly greater resources than their smaller competitors to quickly respond to new regulatory obligations.
“More time for small and medium banking institutions to prepare for the BEAR in an orderly way will reduce the cost burden that would otherwise apply.”
Mr Morrison added that the legislation formed part of the government’s commitment to encourage greater “trust and confidence in the banking system”.
“Where these obligations are not met, APRA will be empowered to seek substantial fines, more easily disqualify individuals and ensure banks’ remuneration policies result in financial consequences for individuals.
“Banks will be required to register their senior executives and directors (accountable persons) with APRA and provide greater clarity regarding their responsibilities.
“These measures will incentivise good behaviour and ensure that banks and individuals are held to account where they fail to meet the standards expected of them.”