The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have commenced joint administration of a new Financial Accountability Regime (FAR).
This will replace the Banking Executive Accountability Regime (BEAR) that came into effect on 1 July 2018 and was solely administered by APRA.
The new regime, a recommendation from the Hayne royal commission, passed in Parliament last month.
APRA and ASIC have now published an information package about the FAR towards improving the operating culture, transparency, and accountability of the banking, insurance, and superannuation industries, along with their directors, and senior executives.
As detailed in the joint administration agreement in the information package, the role each regulator plays under the FAR is consistent with their broader purpose under the twin peaks model for financial regulation in Australia.
ASIC’s role is to focus on impacts to market integrity and consumer protection in the financial system and payments system while APRA’s role is to focus on impacts to the prudential soundness of regulated entities as well as the financial stability of the overall system.
“Just as the BEAR has helped to sharpen risk culture and governance in the banking sector, we expect the FAR to have a similar positive impact in improving standards of accountability across insurance and superannuation,” said APRA deputy chair Margaret Cole.
“We are working closely with ASIC to ensure a smooth transition from the BEAR to the FAR, and we encourage industry to engage with both regulators in the lead-up to the FAR commencing.”
Sarah Court, ASIC deputy chair, added: “We believe the regime will increase transparency and accountability in financial firms and help embed a culture of accountability for misconduct at an individual level – accountable individuals will need to understand and closely engage with their obligations under the FAR.”
With the agreement, ASIC and APRA will take a risk-based and outcomes-focused approach to monitoring and supervision of accountable entities and accountable persons under the FAR – including surveillance, engagements, reviews, and resolving technical queries.
They will maintain structures to oversee co-administration of the regime, including establishing clear accountability across the regulators, timely coordination and escalation of matters, and review of this agreement.
Interestingly, the regulators said they will disclose accountable person disqualifications made under the FAR, to facilitate industry governance of accountable persons, given the FAR permits them to make information from the FAR register publicly available.
The FAR will come into force for the banking industry on 15 March 2024 and for the superannuation and insurance industries on 15 March 2025.
