What is a small, medium or large ADI? Latest BEAR Update

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The Banking Executive and Accountability Regime (BEAR) was passed into law in February of this year. We have talked about his law change several times before (see https://www.compliancequarter.com.au/1-july-2018-getting-prepared-banking-executive-accountability-regime-bear/). Today we look at the latest consultation from the Treasury consequent to that law change. This consultation looks at how the size of authorised deposit-taking institutions (ADIs) are to be defined for the purposes of BEAR.

BEAR Update
Photo by Matthias Goetzke on Unsplash
By Dr Drew Donnelly, Compliance Quarter.

BEAR Update – Legislative Instruments under the BEAR

The BEAR, like many Acts of Parliament, sets out a range of matters to be determined by future determination of Ministers or regulatory bodies. The BEAR provides that the relevant Minister (I.e. the Treasurer), as well as the Australian Prudential Regulation Authority (APRA), have the power to determine, by legislative instrument, a range of matters after consultation Those matters include (but are not limited to):

  • The Minister’s power to exempt a class of ADIs or a class of subsidiaries of ADIs from the application of the BEAR (see Schedule 1, item 1, subsections 37A(2) and 37KA(2));
  • APRA’s power to add additional responsibilities to ‘accountable persons’ under the BEAR. (Schedule 1, item 1, subsection 37BA(4));
  • APRA’s power to exclude specified responsibilities for a particular class of ADIs or subsidiaries so that persons with those responsibilities are not accountable persons. (Schedule 1, item 1, paragraphs 37BB(1)(b) and 37BB(3)(b)).

Small, Medium or Large ADIs

The power addressed in this consultation is the Minister’s power to determine whether an ADI as small, medium or large (Schedule 1, item 1, subsection 37G(3)).

Certain important aspects of the BEAR depend on the size of the ADI. This includes:

  • commencement date;
  • deferral of variable remuneration;
  • the maximum civil penalty for breaching the BEAR.

The determination provides:

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

This metric for determining the size of an ADI was foreshadowed by the Government in the explanatory memorandum that accompanied the passage of the BEAR legislation.[1]

For further information see https://treasury.gov.au/consultation/c2018-t276699/. Submissions can be sent to bear@treasury.gov.au by 20 April 2018.

[1] See Exposure Draft, Treasury Laws Amendment (Banking Executive Accountability And Related Measures) Bill 2017, Explanatory Memorandum, para 1.71.

Should you wish to discuss the BEAR with the team at Compliance Quarter, click here.

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