Financial Accountability Regime transition

Treasury has released for consultation the draft Financial Accountability Regime (Consequential Amendments and Transitional Provisions) Bill 2021. Background.

The Bill makes consequential amendments to various Commonwealth laws to establish the FAR and provides for transitional arrangements relating to the repeal of the Banking Executive Accountability Regime under the Banking Act 1959.

The majority of the obligations under the Financial Accountability Regime will apply to the banking sector on the later of:
• 1 July 2022; or
• six months after the Financial Accountability Regime Bill 2021 receives Royal Assent.

On that date, authorised deposit-taking institutions and their authorised non-operating holding companies will become accountable entities. This means on that date they must:
• begin complying with their obligations under the Financial Accountability Regime, including accountability, key personnel, and notification obligations; and
• have provided an accountability map and appropriate accountability statements to APRA under the Financial Accountability Regime, and keep these up-to-date.

At this stage, the proposed commencement day for the insurance and superannuation sectors is expected to be later of 1 July 2023 or 18 months after commencement of the Financial Accountability Regime.

Accountability statements provided to APRA under the Banking Executive Accountability Regime will automatically transition to be accountability statements under the Financial Accountability Regime.

The deferred remuneration obligations under the Financial Accountability Regime will apply to the banking sector (authorised deposit-taking institutions and their authorised non-operating holding companies) six months later.

The existing deferred remuneration obligations under the Banking Executive Accountability Regime continue to apply to the banking sector (authorised deposit-taking institutions and their subsidiaries) during the six-month deferral period.

Accountable persons of entities in the banking sector will automatically have their registration transitioned from the Banking Executive Accountability Regime to the Financial Accountability Regime. This only applies where the person will continue to be an accountable person under the Financial Accountability Regime.

Some obligations under the Banking Executive Accountability Regime will continue to apply to the banking sector after the application of the Financial Accountability Regime to enable the transition from the Banking Executive Accountability Regime.

This means that:
• APRA must still be notified of relevant changes in an accountability statement or an accountability map, or of a notification event, under the Banking Executive Accountability Regime in accordance with the existing timeframes;
• directions to re-allocate responsibilities given under the Banking Executive Accountability Regime will continue to have force as directions under the Financial Accountability Regime;
• directions for non-compliance given under the Banking Executive Accountability Regime will continue to have force;
• enforceable undertakings and injunctions under the Banking Executive Accountability Regime will continue to have force; and
• APRA will continue to be able to exercise its powers under the Banking Executive Accountability Regime to investigate non-compliance in the same manner and subject to the same obligations as before the application of the Financial Accountability Regime (including secrecy obligations).

In addition, the Financial Accountability Regime can be used to take action in relation to breaches of the Banking Executive Accountability Regime. Specifically, under the Financial Accountability Regime:
• a non-compliance direction may be made in relation to breaches of the Banking Executive Accountability Regime;
• an accountable person may be disqualified in relation to breaches under the Banking Executive Accountability Regime;
• any accountable person disqualified under the Banking Executive Accountability Regime will continue to be disqualified under the Financial Accountability Regime on the same terms; and
• the authority of an authorised deposit-taking institution may be revoked in relation to breaches of the Banking Executive Accountability Regime, regardless of whether the breach was before or after the application of the Financial Accountability Regime to the authorised deposit-taking institutions.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
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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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