After a much long and at times unbearable wait, Federal Parliament has yesterday passed the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2018 (BEAR Legislation). The BEAR Legislation amends the Banking Act 1959 to impose accountability, remuneration and notification obligations on authorised deposit-taking institutions (ADIs) and those in directorship and senior management roles within ADIs.

These reforms are known as the Banking Executive Accountability Regime (BEAR).

The BEAR Legislation reflects earlier comments in Parliament by Treasurer Scott Morrison that the Government wants these reforms to commence on 1 July 2018. Noting the short transitional time period for ADIs to comply, the Explanatory Memorandum suggests that the 1 July 2018 start date will only apply for “large ADIs” whilst “small and medium ADIs” have until 1 July 2019 to implement measures to comply with BEAR.

It appears that the Government’s initial intent is that:

  • a small ADI would have less than or equal to $10 billion on a three year average of total resident assets;
  • a medium ADI would have between $10 billion and $100 billion on a three year average of total resident assets; and
  • a large ADI would be any ADI with greater than or equal to $100 billion on a three year average of total resident assets.

However, the Government may change these based on advice from the Australian Prudential Regulation Authority (APRA).  Hopefully the exact definitions of “small”, “medium” and “large ADIs” under BEAR will be clarified in the near future.

The Explanatory Memorandum also reveals that the “commencement of individual requirements will be in stages”. Therefore, the banking sector will have to wait for APRA to provide more clarity in relation to this aspect of the transition process.

Nevertheless, at Norton Rose Fulbright Australia, our advice for banks and ADIs is to put BEAR back on your radar screens and start preparing, regardless of your size. Ultimately, all ADIs will need to be BEAR compliant, with some sooner and others a little later. It’s starting to sound like a fractured fairy tale.

Additionally, based on previous comments by the chairs of the Australian Securities and Investments Commission and APRA, coupled with the current Royal Commission into financial services, we anticipate that senior management accountability obligations will be extended in the future beyond ADIs to include other APRA-regulated entities (such as trustees of superannuation funds) and financial services licensees generally. Don’t be surprised to find this extension in the recommendations of the Royal Commission.

In the meantime, whilst the exact nature of how APRA wants BEAR to be implemented is still unknown, Norton Rose Fulbright’s global reach places us in a perfect position to assist ADIs to navigate through these uncertainties and prepare for BEAR. The reason is simple – the BEAR Legislation has been imported from similar regimes that have already been implemented in the United Kingdom and Hong Kong, and we are well placed to leverage off the experience of our colleagues in these jurisdictions to anticipate and respond to APRA’s requirements.