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Bill to boost APRA powers one step closer to law

Bill to boost APRA powers one step closer to law

The Turnbull government’s Banking Executive Accountability Regime bill, which will equip the regulator with greater powers, has passed the House of Representatives and is expected to ease through the Senate with bipartisan support.

The Banking Executive Accountability Regime (BEAR) bill, designed to improve accountability, remuneration and notification obligations on authorised deposit-taking institutions (ADIS), is on course for ratification after passing the House of Representatives on Monday night.

The BEAR bill will also provide the Australian Prudential Regulation Authority (APRA) with enhanced powers to enable the body to enforce the rules embedded in the legislation.

In an address to the House of Representatives on Monday (5 February), Treasurer Scott Morrison claimed that the bill will help restore community trust in the banking sector.

“This bill will increase the accountability of banks as authorised deposit-taking institutions [and] their most senior executives and directors, restoring the community’s trust and confidence in the institutions that play such a central role in our financial system and the wellbeing of all Australians,” the Treasurer said.

Under the new arrangements, ADIs will be required to register “accountable persons” to APRA prior to their appointment and to provide accountability statements to the regulator to demonstrate  a “clear allocation of responsibility”.

The legislation is also set to expand APRA’s powers by enabling the regulator to impose remuneration penalties on the nominated accountable persons if an ADI fails to comply with the new guidelines. Such penalties could result in the deferral of an accountable person’s remuneration for a minimum of four years.

Further, the BEAR bill will provide APRA with the power to “readily respond” to compliance failures by bypassing the Federal Court to disqualify accountable persons, and it will also permit APRA to examine witnesses independently.

Moreover, ADIs could face civil penalties of up to $210 million if they breach compliance provisions outlined in the bill.

Despite supporting the legislation, Shadow Treasurer Chris Bowen believes that the government should have extended powers offered to APRA to the Australian Securities and Investments Commission (ASIC).

“[It] strikes me as odd that the government has empowered APRA, not ASIC, in this space, and this is something that will need to be monitored,” Mr Bowen said in the House of Representatives this week.

“We have had, traditionally, a very clear delineation of responsibility between the regulators.

“Based on what is being implemented here, it would be a natural fit for ASIC to have these responsibilities that the government has chosen to give APRA.”

Meanwhile, some industry bodies have claimed that the BEAR bill doesn’t go far enough, with consumer group CHOICE labeling it a “teddy bear”.

Additionally, the Consumer Action Law Centre said: “Treasury has restricted the application of the proposed BEAR so that it will apply to poor conduct or behaviour that is of a systemic and prudential nature. This misses the crucial element of the United Kingdom model that ties accountability measures to poor consumer outcomes, not just prudential matters.”

[Related: Bank executives could be subject to clawbacks]

Bill to boost APRA powers one step closer to law
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