Opening Statement to Senate Economics Legislation Committee - January 2022

Sean Carmody, Executive Director -  Senate Economics Legislation Committee’s Inquiry into the Financial Accountability Regime Bill, Canberra.

APRA welcomes the opportunity to appear before this Committee to assist the Inquiry into the Financial Accountability Regime Bill 2021 (the FAR Bill). 

APRA has made a submission to the inquiry setting out APRA’s experience with the Banking Executive Accountability Regime (BEAR) and preparatory work undertaken by APRA and ASIC in anticipation of the introduction of the FAR legislation.

As the committee will be aware, the BEAR established certain obligations for authorised deposit-taking institutions (ADIs) and their senior executives and directors. The BEAR commenced on 1 July 2018 for large ADIs and 1 July 2019 for all other ADIs. The BEAR was designed to improve the risk and governance cultures of ADIs by imposing a strengthened responsibility and accountability framework for those institutions, their directors and the most senior and influential executives (accountable persons).

The BEAR has been a key regulatory lever for APRA to drive action by ADIs through the identified accountable persons and to transform governance, risk culture, remuneration and accountability outcomes across the banking industry. APRA uses the BEAR in its day-to-day supervision to influence preventative or remedial action to be taken by ADIs and accountable persons well before there is a threat to the ADIs’ financial viability. 

APRA has seen positive outcomes from the BEAR and supports the broadening of the regime to all APRA-regulated entities. This will extend the coverage of an accountability regime aimed at improving risk and governance cultures from 143 ADIs under the BEAR to approximately 435 entities under the FAR. 

Preparation for the commencement of the FAR 

As the committee is aware, the FAR is to be jointly administered by APRA and ASIC. This will require coordination and cooperation to ensure the FAR’s objectives are achieved efficiently and without imposing unnecessary regulatory burden. 

To this end, APRA and ASIC have been working together closely to develop the joint administration framework and infrastructure in preparation for the anticipated implementation of the FAR. These efforts build on the activities already being undertaken across areas where the regulators have been working together more closely and on the Memorandum of Understanding in place between the regulators. 

One of the key pieces of preparatory work underway is the development of a public Joint Administration Agreement (JAA) setting out the high-level principles of cooperation and arrangements for this joint administration. The JAA will cover areas such as oversight of the arrangements, exercising of powers, industry communication, information sharing and enforcement and investigations.

With these opening remarks, we are happy to take your questions.