APRA consults on BEAR for local and foreign medium and small ADIs

The Australian Prudential Regulation Authority (APRA) has commenced a consultation to refine how the Banking Executive Accountability Regime (BEAR) applies to variable remuneration arrangements for medium and small authorised deposit-taking institutions (ADIs). Transition Background.

UPDATE 18 June 2019: APRA has issued its final determination.

A Medium ADI will have assets between $10 billion and $100 billion and a Small ADI will have assets under $10 billion. These amounts are subject to indexation.

Under BEAR, an ADI is required to defer a prescribed minimum portion of an accountable person’s variable remuneration for a prescribed minimum period of time.

APRA intends to determine, by legislative instrument, under paragraph 37EA(4)(b) of the Act, that certain variable remuneration is not variable remuneration for the purposes of the BEAR, where certain conditions are met.

APRA has released a draft proposed legislative instrument which proposes that, irrespective of the organisational structure or whether the ADI is a locally incorporated ADI or foreign ADI, where an individual has both an accountable person role with an ADI (or subsidiary of an ADI) and another role, only the portion of the individual’s variable remuneration that relates to the accountable person role would be subject to the deferral requirements under Division 4 of Part IIAA of the Banking Act.

APRA expects this proposed legislative instrument will not result in any major bank initiating any changes to the amount of deferred remuneration, as the legislative instrument does not apply to their particular corporate structure.

The final legislative instrument will be released before the BEAR comes into force for medium and small ADIs on 1 July 2019.

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