Government finalises FAR rules

The Financial Accountability Regime (FAR) is set to come into effect for Australia’s banks as of 14 March 2024 and will apply to insurance and superannuation entities from 15 March 2025.

The Albanese government, along with regulators, the Australian Prudential and Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC), has finalised the rules to support the full operation of the regime in the lead-up to its implementation.

The FAR (established under the Financial Accountability Regime 2023 Bill) aims to improve accountability standards in the Australian Prudential and Regulation Authority (APRA)-regulated entities, while driving reform in operating culture and strengthening standards of conduct.

The regime will be overseen by both APRA and ASIC and will impose accountability obligations on accountable entities such as authorised deposit-taking institutions (ADIs), insurance, and superannuation entities.

Non-operating holding companies (NOHCs) of an ADI will also have accountability obligations placed on them under the FAR.

Australian ADI’s are currently subject to the Banking Executive Accountability Regime (BEAR) until the FAR comes into force.

Assistant Treasurer and Minister for Financial Services Stephen Jones MP confirmed the Financial Accountability Regime (Minister) Rules 2024 (the Minister Rules) on 7 March, which include:

• Responsibilities and positions of accountable entities in each sector that make someone an ‘accountable person’ subject to the FAR.
  
  
• The threshold (based on total asset size) above which an entity is required to provide the regulators with additional accountability statements and maps.
  
  

“The government is committed to ensuring regulation is applied proportionately without compromising consumer safeguards,” Jones said.

“Following consultation, the rules have been updated to align enhanced regulation with the broader approach to regulation by APRA.”

The FAR is a key recommendation of the financial services royal commission and will act as an expansion of the former BEAR, which previously only applied to the banking sector.

“The FAR ensures that these institutions clearly identify individuals who will be held accountable for the actions of the organisation,” Jones said.

“An executive who breaches these obligations can be penalised with a loss of income, disqualification from working in the sector, and individual civil penalties for assisting in the organisation’s contravention of its obligations.”

APRA and ASIC’s final rules for the FAR include:

• The Regulator rules, which prescribe information for inclusion in the FAR register of accountable persons.
  
  
• The Transitional rules, which prescribe information to be provided by authorised deposit-taking institutions (ADIs) in relation to their existing accountable persons under the BEAR at the transition point to the FAR.
  
  
• Descriptions of ADI key functions to assist banking entities in the allocation of key functions.
  
  
• Reporting form instructions to assist banking entities in providing the required information to APRA and ASIC.
  
  

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