Financial Accountability Regime consultation

Treasury has released for consultation the Financial Accountability Regime (FAR) draft Bill which will extend the Banking Executive Accountability Regime to all APRA-regulated entities, with joint administration from APRA and ASIC.

An accountable entity is generally the entity which is licensed or otherwise authorised by APRA to carry on banking, insurance or superannuation business.

The FAR legislation is being prepared for introduction and passage in the 2021 Spring sittings of Parliament.

The Financial Accountability Regime will impose four core sets of obligations:

  • accountability obligations—which require entities in the banking, insurance and superannuation sectors and theirdirectors and most senior and influential executives to conduct their business in a certain manner;
  • key personnel obligations—which require entities in the banking, insurance and superannuation sectors to ensure that all areas of their operations and those of their group are attributed to directors and most senior and influential executives that are regulated by the Regime;
  • deferred remuneration obligations—which require entities in the banking, insurance and superannuation sectors to defer at least 40 per cent of the variable remuneration (for example, bonuses and incentive payments) of their directors and most senior and influential executives for a minimum of 4 years, and for their variable remuneration to be reduced where accountability obligations are breached; and
  • notification obligations—which require:

    – entities in the banking, insurance and superannuation sectors to meet the core notification requirements to provide the Regulator with certain information about them and their directors and most senior and influential executives; and

    – for entities above a certain threshold, which will be determined by rules made by the Minister under the Bill, those entities will need to prepare and submit accountability statements and accountability maps.

Timetable
For Authorised deposit-taking institutions (ADIs) and their licensed non-operating holding companies (NOHCs), the FAR will apply from the later of 1 July 2022 or 6 months after the commencement of the FAR.

It is intended that the FAR will commence for insurers, their licensed NOHCs and registrable superannuation entity (RSE) licensees from the later of 1 July 2023 or 18 months after the commencement of the FAR.

Enhanced notification thresholds
The Minister will have the power to set out the rules to determine enhanced notification thresholds. Only enhanced compliance entities will be required to submit accountability maps and statement to APRA and ASIC.

The current proposed metric and thresholds are outlined in the table below.

Entity type Metric used to determine enhanced notification threshold
ADIs Total assets > $10b
General insurers Total assets > $2b
Life insurers Total assets > $4b
Private health insurers Total assets > $2b
RSE licensees Total assets > $10b
(This refers to combined total assets of all RSEs
under the trusteeship of a given RSE licensee.)

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
Email:
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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