Banks call for time on BEAR legislation

Australia’s federal government has released draft legislation for the Bank Executive Accountability Regime (BEAR), and the nation’s bankers are calling for more time to have their say.

Under the proposed new BEAR legislation, the Australian Prudential Regulation Authority (APRA) would be further empowered to ensure the honesty and integrity of the senior leadership of Authorised Deposit-taking Institutions (ADIs):

“In summary, an ADI’s BEAR accountability obligations require it to conduct its business with honesty and integrity, deal openly with APRA and ensure that it takes reasonable steps to prevent matters impacting negatively the prudential standing or reputation of the ADI.”

The BEAR, the carrot and the stick

Under the proposed BEAR legislation, set to come into effect from 1 July 2018, 40% to 60% of remuneration for senior bank leaders would be deferred for up to four years.

The payment of this deferred remuneration for Accountable Persons, including chief executives, directors, board members, and heads of HR, IT and Anti Money Laundering, would be conditional on these persons meeting their BEAR obligations, such as submitting accountability statements.

Looking beyond individuals, other civil penalties for breaching BEAR obligations may include fines of up to $210 million for the offending banks.

In a statement, Federal treasurer, Scott Morrison, said:

Banks remain at the centre of some of the most critical decisions in life, including buying a first home, starting a business, and saving and investing for retirement. It is therefore important that mechanisms are in place to deter poor behaviour and provide for accountability where standards of behaviour are not met.

Bankers scramble to respond in time

While the federal government has opened the floor to consultation on the proposed legislation until 29 September, the Australian Bankers’ Association (ABA) has called this consultation period “grossly inadequate”, and accused the government of “playing fast and loose with a critical sector of the economy.”

In a statement, ABA chief executive, Anna Bligh, said that while the banking industry recognises the importance of improving senior executive accountability, seven days to consult is not good enough.

“This is a significant piece of reform that impacts on the integrity of banks and the stability of the financial system and it needs thorough scrutiny.”

“It’s an entirely new addition to the system of corporate governance in Australia. The Government’s timeframe risks serious unintended consequences.”

Bank reputations on the line

The BEAR legislation was first proposed in the 2017 Federal Budget, which also saw the introduction of the government’s controversial Major Bank Levy.

The major banks affected by this levy have seen their reputations take several hits over the past few months, which saw a range of scandals unfold, including AUSTRAC money-laundering charges at CBA, compliance failures at ANZ, and failure to provide financial advice to fee-paying customers. 

While banks have recently been taking measures to meet their regulatory obligations and tighten up their responsible lending criteria, and making popular moves such as abolishing ATM fees, regulators and politicians are keeping a close eye on the industry.

An independent APRA inquiry has been launched to look into the governance, culture and accountability at CBA, while the federal opposition and several media commentators continue to call for a Royal Commission into the nation’s banking sector.

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