The Turnbull government’s Banking Executive Accountability Regime (BEAR) law, which will expand the Australian Prudential Regulation Authority’s (APRA) powers, has passed the Senate with bipartisan support.
The law is designed to improve accountability, remuneration and notification obligations on authorised deposit-taking institutions (ADIS), and will provide APRA with enhanced powers to enable the body to enforce the rules embedded in the legislation.
“This legislation is part of a broader suite of financial services reforms delivering on the Turnbull government’s commitment to put consumers first, ensuring Australians can have trust and confidence in the banking system,” Treasurer Scott Morrison has said.
“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.”
Under the new arrangements, ADIs will be required to register senior executives and directors, or “accountable persons”, to APRA prior to their appointment, and they will 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 law 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 also face civil penalties of up to $210 million if they breach compliance provisions outlined in the law.
“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,” Mr Morrison said.
Smaller ADIs will not be required to implement the new measures until 1 July 2019.
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.
“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 BEAR doesn’t go far enough, with consumer group CHOICE labelling 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.”