BEAR regime not a ‘one-off exercise’: APRA

In an address to the Customer Owned Banking Association (COBA), Pat Brennan, the Australian Prudential Regulation Authority’s executive general manager, policy and advice division, urged authorised deposit-taking institutions (ADIs) to ensure that they account for amendments to the Banking Executive Accountability Regime (BEAR) when implementing its measures.

The BEAR regime, which came into effect for the big four banks on 1 July 2018 and will come into effect for other ADIs on 1 July 2019, serves as an accountability framework, imposing higher standards of behaviour on banks and their senior executives and directors.

APRA recently released a guidance paper outlining expectations regarding how ADIs can effectively implement the regime with regards to matters such as:

• identifying and registering with APRA “accountable” persons (e.g. senior executives and directors), including those who are not directly employed by the ADI;
• creating and submitting an accountability statement for each accountable person (a template for which has been provided), and an accountability map for the ADI;
• establishing a remuneration policy requiring that a portion of accountable persons’ variable remuneration be deferred for a minimum of four years, and reduced commensurate with any failure to meet their obligations; and
• notifying APRA of any accountability-related changes or breaches of accountability obligations within 14 days of the change.

However, speaking to COBA, Mr Brennan warned that the implementation of the regime is not a “one-off exercise”.

“When planning for implementing BEAR, we encourage you to not think of it as a one-off exercise — it is the start of a new, ongoing regime,” Mr Brennan said.

“This means there will be maintenance over time; for example, when there are changes of senior staff or reallocation of responsibilities.

“This also means there is opportunity for the benefits [to] be enhanced and built on over time.”

Further, amid calls from customer-owned banks for “proportionate regulation”, Mr Brennan stressed that the BEAR regime is a “proportionate regime”, noting that the number of accountable persons, the size of potential penalties and the remuneration requirements would vary depending on the size of the ADI.

“[At] the centre of identifying and documenting accountability, there is proportionality in the regime; it is not a case of ‘one size fits all’,” the APRA EGM said.

Mr Brennan concluded: “The clearer the starting point on accountability, consistent with good governance and a strong risk culture, the more straightforward implementing BEAR will be.”

[Related: APRA releases new BEAR guidance]