APRA releases new BEAR guidance

The Australian Prudential Regulation Authority (APRA) has released an information paper to assist authorised deposit-taking institutions (ADIs) to meet their obligations under the Banking Executive Accountability Regime (BEAR).

The regime, which aims to bring into force heightened standards of accountability among ADIs and their most senior executives and directors, came into force for the largest banks in July and is expected to be adopted by all other banks from 1 July 2019.

The new paper aims to assist these banks in implementing the regime while enabling those that have already brought it into play to “refine and embed the regime”. It has reportedly been based on “APRA’s experience to date”.

Specifically, the paper clarifies APRA’s expectation of how an ADI can effectively implement the accountability regime on 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. 

The information paper also includes questions and answers based on some of the issues commonly raised by ADIs during implementation. 

APRA chairman Wayne Byres said that the BEAR presented an opportunity for a major strengthening of accountability among the directors and senior executives of ADIs.

Building on his comments earlier this year regarding the “disturbing” revelations of the Royal Commission into Misconduct in the Banking, Superannuation and Finance Services Industry and that it is up to industry, not the regulator, to rebuild trust in the sector, Mr Byres said: “Many problems that have arisen in the financial system over recent years have had, at their heart, organisational complexity and diffused responsibility.

“By effectively implementing the BEAR, ADIs will genuinely enhance their governance and risk management through much clearer understanding and agreement on individual accountabilities.”

Speaking at an event in Sydney last month, Mr Byres noted: “The BEAR clearly has teeth, and use of the BEAR’s enforcement provisions will demonstrate to the community that there are going to be clear and material consequences for poor prudential outcomes.

“Where I hope the BEAR will have a positive impact is through forcing the industry to hold itself to account much more firmly and quickly than has been the case to date.”

The regulator has said that it will be releasing additional information on particular elements of enforcement of the accountability regime, including the disqualification of accountable persons and civil penalties under the BEAR, in due course.

[Related: Regaining trust in financial sector ‘not the regulator’s job’: APRA]