Big banks wary of BEAR

Three of the four major banks have taken issue with Treasury proposals that would give APRA the power to adjust remuneration and remove executives from their roles.

The major banks have called on the government to reconsider its Banking Executive Accountability Regime (BEAR), which Treasurer Scott Morrison announced as part of the federal budget in May.

If enacted as currently proposed, the BEAR would reinstate the disqualification regime that existed prior to 2008, which gave APRA the power to disqualify any person from an APRA-regulated institution whom it deemed "not fit and proper".

In its submission on the BEAR, Westpac noted that the pre-2008 regime was changed due to the "perceived lack of consistency in how the disqualification power was applied when compared with court-administered decisions".

Westpac's submission argued for the inclusion of a court-based appeals process for any removal powers granted to APRA.

"If APRA’s powers to remove and disqualify approved individuals are enhanced, having a court-based appeals process will preserve the ability for individuals to seek judicial review of a decision, while providing APRA with the immediate and primary power to respond to material misconduct," said Westpac.

Both NAB and ANZ's submissions echoed Westpac's, calling for "procedural fairness" in relation to any APRA decisions concerning its removal and disqualification powers.

ANZ's submission also queried the wisdom of allowing APRA to become involved in the remuneration settings of major banks.

"We question whether involving APRA so closely in setting and influencing remuneration risks [is] undermining the responsibility of boards for appropriate remuneration standards and the role of shareholders in holding boards to account," said ANZ.

"Boards are already subject to rigorous oversight of bank remuneration standards. We think it is appropriate that bank boards continue to be ultimately accountable for the pay standards that they set and enforce.

"Moreover, we note that under current corporate governance arrangements, it is shareholders who are entitled to opine on and vet the adequacy of remuneration arrangements."

In its submission, NAB argued that non-executive directors acting as chairs of committees should be excluded as "accountable persons". NAB also said that the BEAR should not cover head of legal since they have an advisory rather than a "control" function.

The Commonwealth Bank did not make a submission publicly available. A spokesperson for CBA directed Mortgage Business' sister publication, InvestorDaily, to the Australian Bankers' Association submission.

[Related: Customers, brokers question bank ethics and culture]

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Tim Stewart

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