In response to the House of Representatives Standing Committee on Economics reports on the major banks, the Treasurer has announced that the Government will legislate to introduce a Banking Executive Accountability regime, which includes registration of senior executives and directors of all ADI’s, new APRA powers and penalties and remuneration measures.
At the same time, the ASIC Enforcement Review will also develop options to strengthen and reform the breach reporting framework. The Taskforce will report in September 2017.
The Government will legislate a new Banking Executive Accountability Regime with three key components:
- Registration: prior to appointing senior executives and directors, authorised deposit-taking institutions (ADIs) will need to advise the Australian Prudential Regulation Authority (APRA). Upon appointment, these people must be registered with APRA and a map of the role and responsibilities of the ADI’s senior executives provided to the regulator;
- New powers and penalties: additional expectations will be established for how ADIs and their executives conduct their business consistent with good prudential outcomes, with a new civil penalty enforced by APRA for ADIs that fail to meet those expectations. Stronger powers will also be given to APRA to remove and disqualify senior executives and directors from all APRA-regulated institutions. The civil penalty will be a maximum of $200 million for larger ADIs and $50 million for smaller ADIs. APRA will also be able to impose penalties if ADIs do not appropriately monitor the suitability of their executives to hold senior positions.
- Remuneration: a requirement for a minimum of 40 per cent of an ADI executive’s variable remuneration – and 60 per cent for certain executives such as the CEO – to be deferred for a minimum period of four years to ensure executives are more accountable. APRA will be given power to require ADIs to review and adjust their remuneration policies when APRA believes such policies are producing inappropriate outcomes.