The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have published an information package that they said would support the financial services industry in implementing the FAR.
The regime, which replaces and extends the Banking Executive Accountability Regime (BEAR), imposes a strengthened responsibility and accountability framework for APRA-regulated entities in the banking, insurance and superannuation industries and their directors, as well as their most senior executives.
According to the regulators, the goal is to “improve the risk and governance cultures of those financial institutions”.
The BEAR, which took effect on 1 July 2018, was administered solely by APRA, however, the financial services royal commission recommended that provisions modelled on the regime should be extended to all APRA-regulated entities.
The FAR will extend beyond authorised deposit-taking institutions (ADIs) and also apply to insurance companies, superannuation trustees, and licensed non-operating holding companies (NOHCs). It also introduces conduct-focused prescribed responsibilities.
The FAR will come into force for the banking industry on 15 March 2024 and for the superannuation and insurance industries on 15 March 2025.
APRA deputy chair Margaret Cole said: “Just as the BEAR has helped to sharpen risk culture and governance in the banking sector, we expect the FAR to have a similar positive impact in improving standards of accountability across insurance and superannuation.
“We are working closely with ASIC to ensure a smooth transition from the BEAR to the FAR, and we encourage industry to engage with both regulators in the lead up to the FAR commencing.”
ASIC deputy chair Sarah Court also welcomed the regime’s extension to provide accountability in relation to conduct failures.
“We believe the regime will increase transparency and accountability in financial firms and help embed a culture of accountability for misconduct at an individual level – accountable individuals will need to understand and closely engage with their obligations under the FAR,” Ms Court said.
The information package published by APRA and ASIC includes the Joint Administration Agreement that sets out the framework for administering the FAR, as well as a joint information paper providing guidance for ADIs on transitioning from the BEAR to the FAR.
The FAR legislation passed Parliament in early September, with Financial Services Minister Stephen Jones commenting at the time that financial services executives must be “held to high standards of accountability and integrity”.
“An executive who breaches these obligations can be penalised with a loss of income, disqualification from working in the sector, and individual civil penalties for assisting in the organisation’s contravention of its obligations,” said Mr Jones.
