‘With great power comes great responsibility’; FBAA welcomes FAR

Assistant Treasurer and Minister for Financial Services Stephen Jones MP has confirmed that Parliament has passed the Labor government’s legislation to implement the Financial Accountability Regime, in a move welcomed by the Financial Brokers Association of Australia (FBAA).

Managing director of the FBAA, Peter White AM, said the association supports the FAR as “being the extension to what was the past Banking Executive Accountability Regime (BEAR)”.

“Individuals who make decisions that affect the lives and futures of Australians should be held accountable when things go wrong or poor decisions are made that deliver poor outcomes for consumers, investors and markets,” Mr White added.

“As they say, with great power comes great responsibility.”

According to Mr Jones, the passing of this legislation completes the final major recommendation to the government made by the banking royal commission, which “exposed significant and systemic misconduct across the industry”.

The FAR (established under the Financial Accountability Regime 2023 Bill) aims to improve accountability standards in the Australian Prudential and Regulation Authority (APRA)-regulated entities, while driving reform in operating culture and strengthening standards of conduct.

The regime will be overseen by both APRA and the Australian Securities and Investments Commission (ASIC) and imposes accountability obligations on accountable entities such as authorised deposit-taking institutions (ADIs), insurance, and superannuation entities.

Non-operating holding companies (NOHCs) of an ADI will also have accountability obligations placed on them under the FAR.

“The FAR replaces and extends the Banking Executive Accountability Regime by imposing tough new accountability obligations on banks, insurers, and superannuation funds,” Mr Jones said.

“The FAR ensures that these institutions clearly identify individuals who will be held accountable for the actions of the organisation.

“An executive who breaches these obligations can be penalised with a loss of income, disqualification from working in the sector, and individual civil penalties for assisting in the organisation’s contravention of its obligations.”

The FAR will be applied to the banking industry six months following royal assent and to the insurance and superannuation industries after 18 months.

CSLR passes

The passing of this legislation follows the government’s passage of legislation to establish the Compensation Scheme of Last Resort (CSLR) earlier this year.

Like the FAR, the CSLR was another recommendation made from the banking royal commission and has the objective of providing compensation to eligible consumers where they have an Australian Financial Complaints Authority (AFCA) determination in their favour where the relevant financial firm has not compensated the consumer in accordance with the determination.

The scheme facilitates the payment of up to $150,000 in compensation and covers five financial products and services, including personal advice on relevant financial products to retail clients, credit intermediation, securities dealing, credit provision, and insurance product distribution.

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