BEAR Regime Continues to Raise Concerns in Financial Services Sector

The Banking Executive Accountability Regime (BEAR) has made banks and businesses cautious and concerned. Banks have echoed a warning that BEAR threatens the clarity of roles between APRA and ASIC, and also creates potential upheaval with insurance and superannuation funds, as BEAR could be broadly applied to such organisations.

ANZ recommends that BEAR must have strong clarification of APRA and ASIC’s responsibilities, as their relationship with banks will be a cause of confusion regarding legal obligations and could create a lack of procedural fairness. APRA could become the supervisor and the enforcer, creating a ‘witch hunt’ approach, as their supervision will be obscured. All banks welcome the efforts of creating healthy competition, maintaining accountability, and managing responsibility correctly and although banks support these ideals, they have high concerns with BEAR’s lack of regulatory oversight and legal duties. With BEAR, APRA will have the power to fine banks up to $200 million for breaches of BEAR. Again, these powers could lead to unfair legal implications for banks and other organisations.  Some organisations, such as the Australian Banker’s Association (ABA), have suggested that ASIC and APRA co-ordinate their responses in areas that overlap, including their disqualification powers. One of their concerns is that BEAR does not define the role of Non-Executive Directors (NEDs) where ABA suggests that NED’s should be excluded in principal.

Of course, with the legal implications natural justice or due process dictates a more certain process of decision making in this area. APRA must have the responsibility and duty to prove their reasons for disqualification of certain industries, and to be recognised with the legal and evidentiary standards. Similarly, Westpac proposes the inclusion of a court-based appeal process, which examines whether disqualification is validated on the facts, rather than an appeal based on an error of law. Banks recommend that the Corporations Act, Section 180 “safe harbour” be integrated into BEAR to ensure there are defences for Directors.

Westpac believes that banks should continue to maintain their discretion in remuneration matters, as there is already transparency through the existing remuneration reporting, disclosure rules and practices. The banks have also made it clear that they want the extension of BEAR to be limited as it applies to their staff. BEAR could be applied to other entities; however, superannuation and insurance companies do not want it to be extended to them.

NAB, ANZ, Westpac and the ABA have stated that the new regime for accountable persons should be integrated with APRA’s current regime for fit and proper persons, known as CPS 510. This will ensure that the regimes will not be crossed over and cause confusion. Another criticism from the Customer Owned Banking Association, states that, “BEAR has been designed for a one size fits all approach”, which will “create excessive red tape on customer-owned [banks], whose behavior was not the impetus of the BEAR measure.”

There are many legal implications with BEAR that banks and other organisations are forewarning, many of these being already managed by other laws and governing regulations.

APRA has declined to comment with these concerns of BEAR.

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