What is BEAR?

The Banking Executive Accountability Regime (BEAR) is set out in Part IIAA of the Banking Act 1959 and took effect in February 2018.

BEAR establishes accountability obligations for authorised deposit-taking institutions (ADIs) and their senior executives and directors. The regime also establishes deferred remuneration, key personnel and notification obligations for ADIs.

An ADI is a financial institution which is authorised by the Australian Prudential Regulation Authority (APRA) to accept deposits from the public.

General Obligations of ADIs

Each ADI must take reasonable steps to:

  • conduct its business with honesty and integrity, and with due skill, care and diligence;
  • deal with APRA in an open, constructive and cooperative way;
  • prevent matters from arising that would adversely affect the ADI’s prudential standing or prudential reputation;
  • ensure that each of its accountable persons meets his or her accountability obligations; and
  • ensure that each of its subsidiaries that is not an ADI complies with the above as if the subsidiary were an ADI.

Accountable persons

Accountable persons comprise:

  • all directors of the board of an ADI;
  • individuals with actual or effective senior executive responsibility for management or control of a significant or substantial part or aspect of the operations of the ADI or ADI group; and
  • individuals with senior executive responsibility for one of the particular responsibilities specified in the legislation.

Each accountable person must:

  • act with honesty and integrity, and with due skill, care and diligence;
  • deal with APRA in an open, constructive and cooperative way; and
  • take reasonable steps in conducting their responsibilities as an accountable person to prevent matters from arising that would adversely affect the ADI’s prudential standing or prudential reputation.

While APRA does not approve accountable persons, an individual is required to be registered with APRA prior to commencing as an accountable person, with a grace period of 28 days for temporary or unforeseen vacancies.

ADIs must notify APRA within 14 days after any of the following events:

  • an individual ceasing to be an accountable person;
  • an ADI becoming aware of a breach of accountability obligations by the ADI or an accountable person; and
  • a reduction in variable remuneration, or the dismissal or suspension of an accountable person, because he or she failed to comply with accountability obligations.

Accountability Statement and Map

An ADI is required to provide APRA with an accountability statement for each accountable person detailing the part(s) or aspect(s) of the ADI’s or ADI group’s operations for which he or she is accountable.  An accountability statement is a description of the areas of responsibility attributable to each accountable person. Each accountable person must have an accountability statement that outlines the areas over which he or she has effective management or control.

An ADI is also required to provide an accountability map showing how collectively the responsibilities of accountable persons come together to cover all parts or aspects of the operations of the ADI or ADI group. An accountability map is a description of the responsibility of each accountable person in question. It should show how an ADI has considered the appropriate management structure for the organisation or broader group and how it attributes effective responsibility for key business activities to accountable persons.

An ADI must provide APRA with an updated accountability statement or accountability map within 14 days after any change.

Remuneration

ADIs are required to defer a prescribed minimum proportion of an accountable person’s variable remuneration for a minimum of four years.

An ADI’s remuneration policy must require a reduction in an accountable person’s variable remuneration proportionate to any failure to comply with accountability obligations.

Disqualification and civil penalties

Accountable persons: In serious cases of non-compliance with accountability obligations, APRA may disqualify an individual from being an accountable person.

ADIs: APRA may apply to the Federal Court of Australia to seek a pecuniary penalty if an ADI breaches its obligations under the accountability regime.

APRA’s powers regarding disqualification, including to vary or revoke a disqualification, are subject to merits review.  An affected person may request that APRA reconsider its decision.  Where a person remains dissatisfied with APRA’s decision, the affected person may seek a review by the Administrative Appeals Tribunal.

Things to watch

  1. Ensure that the accountability statement aligns with the accountable person’s functions and responsibilities.
  2. Ensure that the accountability map reflects the sum total of accountability statements.
  3. Refresh the statements and maps as developments occur, remembering the notification obligation to APRA.
  4. A very detailed remuneration policy is essential

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