Australian Government Reintroduces Legislation for Financial Accountability Regime

Australia's government has reintroduced legislation to extend the BEAR (Banking Executive Accountability Regime) to all APRA-regulated entities.

The BEAR was introduced in 2018, establishing accountability obligations for banks and their senior executives and directors, along with deferred remuneration, key personnel and notification obligations for banks.

The new FAR (Financial Accountability Regime) is intended to extend the BEAR to the entire financial sector, imposing accountability obligations on all banks, superannuation trustees, insurers, and their senior executives.

The FAR legislation was introduced by Australia's previous government but lapsed with the calling of the federal election in April.

Two bills have been introduced – the Financial Accountability Regime Bill 2022 and the Financial Sector Reform Bill 2022 – which together will establish the FAR.

If the bills pass, the FAR will apply to the banking industry six months after commencement, and to the insurance and superannuation industries 18 months after commencement.

Broad principles-based obligations will apply to financial services firms and accountable persons, requiring them to take reasonable steps to act with "honesty, integrity, and with due care, skill and diligence".

Certain entities will be required to defer at least 40% of the variable remuneration of their directors and senior-most executives for a minimum of four years. Variable remuneration must also be reduced for non-compliance with accountability obligations.

FIs will also have to submit accountability maps and accountability statements to regulators and be able to demonstrate proactive compliance by accountable persons and entities.

The legislation also provides for joint administration of the FAR by both APRA and ASIC, and allows for civil penalties to be imposed against FIs and for their senior executives to be disqualified as accountable persons if the accountability obligations are not met.

The FAR imposes "strengthened responsibility and accountability framework that will ensure that the directors and most senior and influential executives of financial institutions will be held accountable for their decisions and conduct which have significant flow on effects for everyday Australians and the Australian economy," Treasury said in a statement.