Posted: 06 Oct. 2022 10 min. read

FARewell BEAR

Reintroduction of Bill and Minister Rules reignite the push to FAR go-live

Over the past 12 months the Australian financial services sector has experienced remarkable change. From responding to a pandemic, to the election of a new government, the sector has continued a steady influx of regulatory change despite several societal local and global impacts. Operating amongst the changing landscape has been the Financial Accountability Regime (the ‘FAR’) Bill. Originally introduced in October 2021, the FAR Bill has undergone an unusually long consultation due to a referral to the Senate Economics Legislation Committee for scrutiny, a dissolution of government, and most recently the adjournment of parliament upon the Queen’s passing. Despite these delays however, earlier this month the government (re)introduced the Financial Accountability Regime Bill 2022 (the ‘Bill’) and accompanying Financial Accountability Regime Minister Rules 2022  (the ‘Minister Rules’), to get the Bill back on track for assent and, ultimately, go-live.

The Bill

What has changed in the Bill?

Nothing. The Bill remains largely unchanged from the FAR Bill introduced towards the end of last year.

What is the commencement date?

The commencement date for Authorised Deposit-taking Institution (ADIs) remains at 6 months after the commencement of the legislation. 

The commencement date for insurers and Registrable Superannuation Entity licensees remains at 18 months after the commencement of the legislation.

What is the position in relation to individual civil penalties?

The individual civil penalties remain excluded (other than in relation to ancillary contraventions, which is unchanged).

It is worth noting that Senator Nick McKim has proposed amendments  to re-introduce individual civil penalties. These amendments may receive more attention in the Senate and thus the position is not yet finalised.

The Ministerial Rules

What are the Minister Rules?

On 12 September 2022 Treasury released the Minister Rules for consultation. The Minister Rules, that will commence on the same day as the legislation, support the Bill and seek to prescribe:

  • Particular responsibilities and positions which cause a person to be subject to the FAR in the banking, insurance and superannuation sectors;
  • The enhanced notification threshold, which is the total asset size above which an entity is required to comply with additional notification obligations; and
  • The way that a written record can be authenticated in a proceeding as prima facie evidence of the statement it records.

The consultation period for the Minister Rules concludes on 7 October 2022.

What are the key takeaways from the Minister Rules?

We consider in this blog the key takeaways that arise in the Minister Rules related to prescribed responsibilities and enhanced notification thresholds. There is additional detail in the Minister Rules  that should be considered by organisations outside this blog.

Prescribed responsibilities

There have been several notable changes to the previously issued list of prescribed responsibilities. The most significant of these changes are as follows:

  1. Removal of the prescribed responsibility for end-to-end product responsibility. The impact of this welcomed removal will be:
    • Removal of the prescribed end-to-end product responsibility within Accountability Statement/s;
    • Mapping of end-to-end product responsibility is still expected, but this may not be assigned to a single Executive and responsibilities should be defined in accordance with the DDO responsibilities where relevant;
    • Where an organisation identified that an Accountable Person was caught solely due to product responsibility, that person may continue to be caught under the general principle test.
  2. Introduction of a prescribed responsibility for significant related entity (SRE) business activities. It is acknowledged in the explanatory statement that this addition is intended to capture the Chief Executive Officer (or equivalent of an Accountable Entity), through the use of ‘business activities’. The impact of this addition will be two-fold:
    • For entities that identified a single Accountable Person as holding responsibility for an SRE, the Executive will move from being caught under the general principle test to a prescribed responsibility;
    • For entities that identified multiple Accountable Persons as holding responsibilities for the SRE, a single Executive will need to be identified and reasonable steps uplifted accordingly where services are internally outsourced.

Classification of entities

The enhanced notification threshold remains unchanged from previously released metrics, however, there is further detail in the Minister Rules about how entities can determine the total asset size and value sector-by-sector.

As previously identified, where an accountable entity within a corporate group meets the enhanced threshold, all other accountable entities within that group will need to comply with the enhanced notification obligations irrespective of whether they meet the enhanced threshold.

What’s next?

At this time, we do not expect that the Bill or Minister Rules will create any fundamental shift in how organisations understand, approach and/or implement the FAR. For those organisations that are already mid-way through FAR implementation, we expect that programs will continue as planned. For those that are yet to start, we anticipate that the release of the legislation alongside the Minister Rules may create the impetus required to get funding and establish a project team.

Sitting dates and expediency

On 28 September 2022, the Bill passed through the House of Representatives. It still has to be passed in the Senate, who are due to next sit on the 25th of October 2022.

It is possible that, unless rigorous debate and significant amendments ensue, the Bill will be passed through the Senate in that sitting. If that occurs, ADIs will have a go-live of April 2023, and insurers and Registrable Superannuation Entity licensees will have a go-live of April 2024.

Despite the longer timeframes, the response from many across the industry so far has been that the impact of a April deadline would be shortened by its proximity to the December/ January shutdown period, with many Executives and Board Members taking leave. As such, many feel as though we are working towards a November 2022/ 2023 timeframe, regardless of the effective date.

How can Deloitte help?

We have assisted with the implementation and post-implementation of the Banking Executive Accountability Regime (BEAR) across large, medium and small ADIs. We are also already supporting many clients, including life insurers, general insurers, health insurers, wealth managers and RSE trustees, with implementation of the FAR.

We understand both the regulatory and the practical implications of implementing BEAR/ FAR, and how it should run in a BAU environment. Importantly, one thing that differentiates us from many of our peers is that we have provided in-depth, end-to-end support for our BEAR and FAR clients, and since 2017, we have invested in understanding BEAR and FAR and its implication – and this shows in our delivery, pragmatic approach and insights.

Get in touch

Rosalyn Teskey

Rosalyn Teskey

Partner, Audit & Assurance

Rosalyn is a partner in Deloitte's Melbourne office in the Governance, Regulation and Conduct practice. She specialises in supporting firms to design and assess frameworks to treat customers fairly, including the development of conduct, product governance, sales practices and complaints handling frameworks. Rosalyn co-leads our Accountability practice and leads Deloitte’s Design and Distribution and product governance offering.

Julia Younger

Julia Younger

Manager, Audit & Assurance

Julia is a Manager in the Governance, Regulation and Conduct practice based in Brisbane. She specialises in large and small transformation projects, uplifting frameworks, practices, policies and procedures to effectively embed regulatory change. Julia also has experience in commercial litigation in Australia and England.

More about our authors

Georgia Amery

Georgia Amery

Senior Manager, Audit & Assurance

Georgia is a Senior Manager in the Governance, Regulation and Conduct practice based in Brisbane. She specialises in supporting clients across the financial services sector in designing, implementing and reviewing frameworks, policies and procedures focused on preventative conduct and promoting good customer outcomes.

​Sarah Russo

​Sarah Russo

Partner, Audit & Assurance

Sarah is a partner in Deloitte's Brisbane office in the Governance, Regulation and Conduct practice. Sarah is a highly qualified and experienced risk, assurance, regulatory and governance professional, having worked as a financial services lawyer, risk manager and with both APRA and ASIC. Sarah works predominantly with financial services clients assisting with governance, regulation and conduct matters including BEAR/FAR implementation, Design and Distribution Obligations, regulatory reviews and change programs, remediation, breach reviews and internal audit programs.