APRA and the Australian Securities and Investments Commission (ASIC) have commenced early consultation around the introduction of the Financial Accountability Regime (FAR). The FAR aims to establish a strong accountability framework for these entities, including their directors and top executives, with the objective of enhancing risk management and governance practices in the financial sector.
The FAR’s intent is to replace the Banking Executive Accountability Regime (BEAR).
Who will be impacted?
Unlike the BEAR, the FAR will encompass not only ADIs but also insurance companies, superannuation trustees, and licensed non-operating holding companies (NOHCs). Both APRA and ASIC will jointly administer the FAR, as part of a coordinated effort to oversee its implementation.
APRA-regulated ADIs will be the first impacted by FAR, with its application beginning six months after the Financial Accountability Bill 2023 receives Royal Assent. For insurance and superannuation entities, the FAR will apply 18 months after Royal Assent.
This staggered timeline should create a smoother transition, as it will enable organisations, their Boards or relevant oversight functions to prepare for the regulatory changes early, ensuring effective application and compliance.
What will change?
To drive early engagement and support successful implementation, APRA and ASIC have issued a set of documents for consultation – available here. These include proposed regulator rules, which share details on the FAR register of accountable persons, as well as ADI key function descriptions. In addition, proposed transitional rules have been provided to help banking entities report accurate information about existing accountable persons under the BEAR, while the transition phase occurs.
Although specific functions for insurance and superannuation entities will be consulted on at a later stage, we encourage organisations in these sectors to review the regulator rules, as their key functions will most likely be similar to those included for ADIs.
Overlaps with CPS 511
While the looming implementation of CPS 511 Remuneration has a broader focus on remuneration practices across APRA-regulated entities, it shares many overlapping requirements with the FAR. Efficiencies can be found for APRA-regulated entities in the banking, insurance and superannuation industries when implementing both regulatory changes concurrently.
Similar to FAR, CPS 511 has come into effect from 1 January 2023 under a staged implementation approach:
- ADIs that are Significant Financial Institutions (SFIs) are impacted from 1 January 2023;
- Insurance and Registrable Superannuation Entities (RSEs) licensee SFIs from 1 July 2023; and
- Non-SFIs are impacted from 1 January 2024.
Have your say
To ensure that the FAR is aligned to the financial services industry’s needs, APRA and ASIC welcome any feedback regarding the proposed regulator rules, ADI key functions, and transitional rules. Submissions are open until 17 August 2023.
How we can help
To ensure your smooth transition to the FAR and CPS 511, contact our team of expert advisors for help. Whether you want to confirm you’re on the right track or a full review of your mechanisms, frameworks and policies to prepare for the regulatory changes – don’t hesitate to reach out to discuss your organisation’s unique needs.
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