By Jim Bulling and Ben Kneebush
On 8 March 2023, the Government introduced the long-awaited Financial Accountability Regime Bill 2023 and Financial Accountability Regime (Consequential Amendments) Bill 2023 (collectively, the Bills) into Parliament. These propose to establish the Financial Accountability Regime (FAR), a strengthened responsibility and accountability framework that replaces the existing Banking Executive Accountability Regime (BEAR).
Broadly, the FAR differs from the BEAR by extending the accountability regime to a wider range of entities and expanding upon the obligations of entities and their executives in a number of respects. In addition to authorised deposit-taking institutions (ADIs), the FAR will also apply to insurance companies, superannuation trustees and licensed non-operating holding companies.
APRA and ASIC Commence Early Consultation
As the FAR awaits passage in Parliament, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have commenced early consultation on ‘key materials’ to support the regimes early engagement and timely implementation.
On 20 July 2023, the regulators released the following ‘key materials’ for consultation:
- Draft ‘Regulator rules’: these rules prescribe information that is to be included in the register of accountable persons that the regulators must maintain under the FAR.
- Draft ‘ADI key function descriptions’: this document provides supporting detail about the ADI key functions, as prescribed in the Regulator rules, that ADIs should consider when developing accountability statements.
- Draft ‘Transitional rules’: these rules prescribe information that ADIs must provide to the regulators, within 30 days after commencement, to facilitate the seamless transition from BEAR to the FAR.
The consultation on these ‘key materials’ is open for submissions until 17 August 2023.
What about Insurers and Super Funds?
In the early consultation announcement, the regulators state that they will consult insurers and superfunds on the list of specific key functions for the entities in due course. It is of note that the draft Regulator rules prescribe data items, to be included in the FAR register, are applicable to all accountable entities (meaning all APRA-regulated entities including insurers and superfunds).
What is the Timeline for Implementation?
The regulators have stated that commencement is staggered by industry, with the FAR commencing on the following timelines:
|6 months after the Financial Accountability Regime
Bill 2023 receives Royal Assent
|18 months after the Financial Accountability Regime
Bill 2023 receives Royal Assent
The FAR largely extends and expands on the four core obligations set by BEAR, being:
- Accountability obligations;
- Key personnel obligations;
- Deferred remuneration obligations; and
- Notification obligations.
Therefore, ADIs previously regulated under BEAR should begin to review their existing accountability and responsibility systems to ensure these arrangements will continue to be compliant with the expanded obligations under the FAR.
APRA-regulated entities not previously regulated under BEAR, being insurers and super funds, should begin to consider whether they have the appropriate accountability and responsibility systems in place to be compliant with their new obligations under the FAR.