Disqualified bankers to be listed on ‘register’

The Australian Prudential Regulation Authority has revealed that it intends to list individuals disqualified under the Banking Executive Accountability Regime on a “disqualification register”.

In its submission to the Senate Standing Committees on Economics’ hearing on Banking Executive Accountability and Related Measures Bill 2017 on Friday (17 November), the prudential regulator said that it aims to provide transparency. 

The proposed Banking Executive Accountability Regime (BEAR) aims to “reinforce and enhance APRA’s existing requirements for banks to maintain — and be seen to maintain — sound governance arrangements, prudent management practices and a financially healthy position”, according to APRA.

Further, BEAR establishes a set of expectations for banks and accountable persons to be “acting with honesty and integrity, due skill, care and diligence, and dealing with APRA in an open, constructive and cooperative way”. 

APRA outlined that while existing prudential requirements require notification of the fitness and propriety of responsible persons within 28 days of being appointed to a role, under the proposed legislation, accountable persons will be required to register with APRA prior to taking up duties, with an exception for temporary or unforeseen vacancies.

The regulator would then maintain a register of accountable persons based on information provided by each bank and will update the register as staffing changes occur.

Banks and would-be ADIs must also notify APRA when an accountable person has been dismissed, suspended or had reduced variable remuneration due to a failure to comply with the accountability obligations.

APRA noted: “Appropriately, the proposed legislation does not give APRA authority to veto appointments or refuse registration in the normal course. Nor does APRA envisage conducting detailed vetting of all proposed accountable persons. It is important for accountability that it remains the role and responsibility of boards and senior management of ADIs to ensure they recruit appropriate individuals into executive positions. If APRA did take a more active role in judging the merit of appointments, this would risk reducing accountability by virtue of ADIs relying on APRA’s vetting rather than their own decision-making processes. 

“However, the registration process does allow APRA the opportunity to raise any concerns prior to an accountable person assuming a role, such as, for example, where APRA is aware of previous behaviour by the individual that may mean they are unsuitable for a role of significant influence.”

APRA would also be able to direct a bank to “reallocate responsibilities among accountable persons” under BEAR, but has said that instances of this would be “rare”.

The submission continues: “Should an ADI or an accountable person not meet these expectations, and therefore undermine or put at risk the ADI’s prudential standing or prudential reputation, APRA can disqualify an individual so that they can no longer be appointed to a role with significant influence or, in the case of an ADI, apply to the courts to impose significant civil penalties. 

“Although not specified under the BEAR legislation, it would be APRA’s intent that individuals who are disqualified would be disclosed on APRA’s disqualification register.”

Commencement date ‘will be challenging’

APRA went on to conclude that the implementation date for BEAR could be “challenging”.

In its submission, the regulator stated: “Following passage of the legislation, both APRA and the banking industry will have a great deal of work to do to implement the accountability regime by the scheduled commencement date of 1 July 2018.

“APRA expects that this time frame will be challenging; for this reason, the legislation provides some additional transition arrangements in some areas.”

[Related: Banks have ‘lost the social right to make money’]

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Annie Kane

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