Last time in The Banking Executive Accountability Regime (BEAR) Exposure Draft – Part One we talked about the new role of an ‘accountable person’ under the proposed Banking Executive Accountability Regime (BEAR), as described in the Government’s recent exposure draft Bill. In today’s piece, part two, we look at the what happens when an accountable person, or the bank itself, fail to fulfil its obligations under BEAR.

By Dr Drew Donnelly, Compliance Quarter

 

Existing Powers of APRA

The Australian Prudential Regulation Authority (APRA) already has a range of powers that it uses to ensure Authorised Deposit-Taking Institutions (ADIs) (including banks) fulfil their responsibilities under the prudential supervision requirements. APRA’s current powers include:

  • the power of direction (section 11CA of the Banking Act 1959), which enables APRA to require a regulated entity to take action to address a particular issue;
  • making prudential standards under section 11AF of the Banking Act 1959, which ADIs must comply with;
  • revocation of banking licenses under section 9 of the Banking Act 1959;
  • removing or disqualifying a director, senior manager or auditor under Division 3 of Part II of the Banking Act 1959; and
  • injunctions and other orders from a court.

If the new proposals come into force, APRA will still be able to use these existing powers, but the BEAR will also introduce a range of new powers.

New Powers relating to ‘accountable persons’

Some of the new enforcement powers of APRA relate to the role of the ‘accountable person’, as discussed last time. APRA will now be able to disqualify an accountable person in an ADI or in a subsidiary, or disqualify an accountable person in relation to a class or classes of ADIs or their subsidiaries (see Schedule 1, item 1, section 37J of the draft Bill).

In assessing whether or not an accountable person has breached the BEAR requirements, APRA will consider information provided by the ADI concerning accountability responsibilities within that ADI.

New powers relating to ADIs

In serious cases, APRA will be able to exercise its power to seek civil penalties where an ADI has failed to:

  • comply with BEAR accountability obligations (see Schedule 1, item 1, section 37 of the draft Bill);
  • meet personnel obligations, including the requirement to ensure operations are covered by an accountable person (see Schedule 1, item 1, section 37D of the draft Bill);
  • register an accountable person and give APRA an accountability statement for that person; (see Schedule 1, item 1, sections 37F and 37HA of the draft Bill);
  • provide APRA an accountability map (see Schedule 1, item 1, sections 37F and 37FB of the draft Bill), and
  • defer the remuneration of accountable persons as required under BEAR (see Schedule 1, item 1, section 37E of the draft Bill).

Importantly, both ADIs and ‘accountable person’ will be prohibited from indemnifying themselves against the financial consequences (such as fines or civil penalties) that may result from breach of the BEAR (see Schedule 1, item 1, section 37KB of the draft Bill).

New examination and investigation powers

As well as enforcement powers, BEAR also provides APRA with new examination and investigation powers (see Schedule 2, item 4, section 61A of the draft Bill). This includes a requirement that a person to appear before an investigator where there is a reasonable belief that the person has information relevant to an investigation. Refusal to appear before the investigation, to answer questions, or to swear that information is provided is true, will be a criminal offence.

 

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