Banking Executive Accountability Regime

Article

Banking Executive Accountability Regime (BEAR)

Preparing for accountability regimes in superannuation, insurance and beyond

BEAR is live for small and medium banks on 1 July 2019, while large banks have been regulated under BEAR since 1 July 2018.

In his final report, Commissioner Hayne recommended that provisions modelled on BEAR should apply to all APRA-regulated entities, and that ASIC should administer those regimes, and BEAR, along with APRA. The Government responded by saying it would implement a corresponding conduct-focused accountability regime, regulated by ASIC to non-prudentially regulated entities. It will apply to AFSL and ACL holders, market operators, and clearing and settlement facilities.

The timing for these changes is not certain, although in March 2019, APRA wrote to all RSE Licensees and asked them to start implementing Hayne’s recommendations now, including BEAR.

The banks had little time to consult on BEAR, and not much time to implement. A similar approach could be taken with superannuation and insurance. This means that organisations should start preparing for a similar regime sooner rather than later.

At its heart, BEAR is about effecting cultural change, and uplifting the governance and risk management of organisations. While compliance is one element, since these regimes impact the most senior stakeholders in the organisation, a human-led approach to BEAR is critical.

Organisations can start on some key ’no regrets’ activities now, including:

  • Begin understanding how BEAR has worked for banks, and lessons learned
  • Consider how a BEAR regime would apply in your sector. For example:
    • In superannuation, how would BEAR obligations sit with SIS covenants?
    • In insurance, will BEAR capture the entire group under a registered non-operating holding company (NOHC), or just at the regulated entity level?
  • Be ready to contribute to the consultation process - it could be fast
  • Start understanding and mapping accountabilities of likely accountable persons now. Understand where the gaps are, the overlaps and grey areas
  • Consider how you will approach ’reasonable steps’. How will each individual, and the organisation, meet their accountability obligations?
  • What remuneration changes will be necessary to align to BEAR’s requirements?
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