The Financial Accountability Regime Bill 2021 (FAR Bill) was introduced in the House of Representatives on 28 October 2021. This legislation will replace and extend the Banking Executive Accountability Regime (BEAR) (which currently only applies to authorised deposit-taking institutions (ADIs)) to all APRA-regulated entities – with some key changes, including:

  • the Financial Accountability Regime (FAR) while be jointly administered by APRA and ASIC;
  • FAR will cover ADIs, general insurers, life insurers, private health insurers and RSE licensees, as well as their ‘significant related entities’. Like BEAR, FAR will apply to Australian entities, as well as entities that are incorporated and operated outside of Australia that are captured as significant related entities;
  • there is a new positive obligation for accountable persons to take reasonable steps to prevent material contraventions of a number of financial services laws;
  • FAR expressly recognises that persons may be subject to civil penalties if they are found to have accessorial or ancillary liability (e.g. if the person assists, aids or abets a contravention of FAR); and
  • there is a new directions power that provides ASIC or APRA (with the agreement of the other regulator) with the power to give broad directions if it has reasonable grounds to believe an accountable entity or accountable person has contravened or is likely to contravene a provision of the FAR and believes that the direction is reasonably necessary.

Once passed by Parliament, FAR will have effect as follows:

  • for the banking industry, it will apply from 1 July 2022 (or six months after Royal Assent, whichever is later); and
  • for the insurance and superannuation industries, it will apply from 1 July 2023 (or 18 months after Royal Assent, whichever is later).

SO WHAT CAN YOU DO NOW?

  • We suggest that APRA-regulated entities start looking at their governance and accountability structures to identify changes they may need to make to comply with FAR.
  • For ADIs, it will be a matter of looking at their existing BEAR governance documents, structures and processes and identifying if any changes are needed to comply with FAR.
  • For superannuation trustees, life insurers and general insurers, many of the FAR obligations will feel familiar, as the obligations can be matched to existing financial services regulatory regimes, particularly the AFS licensing regime and the APRA prudential framework. As the superannuation and insurance sectors undergo seismic regulatory and structural changes, the implementation of FAR can be used to complement in-flight regulatory reform projects, spanning rationalisation activity, revisions to decision-making and delegation frameworks, operational simplification and regulatory engagement frameworks. The key complexity will be effectively integrating FAR into existing multifaceted governance and compliance frameworks.
  • Based on our experience advising on the implementation of BEAR, it is helpful to start early when there is less time pressure, particularly where it would make sense to undertake any organisational restructure as part of the implementation process.

Read our more detailed insights here.

If you have any questions about FAR and its implementation, get in touch with one of our team members below.

 

Michael Vrisakis
Michael Vrisakis
Partner
+61 2 9322 4411
Charlotte Henry
Charlotte Henry
Partner
+61 2 9322 4444
Crystal Sanders
Crystal Sanders
Special Counsel
+61 2 9225 5146
Tamanna Islam
Tamanna Islam
Senior Associate
+61 2 9225 5160
David Kim
David Kim
Senior Associate
+61 2 9225 5407