Banks face pressure to comply with new accountability rules despite missing details

Regulators have warned banks must ensure they are ready for new banker accountability laws by June 30, extending the deadline by over two months.

Assistant Treasurer and Financial Services Minister Stephen Jones. Picture: NCA NewsWire / Gary Ramage

Regulators have warned banks must ensure they are ready for new banker accountability laws by June 30, extending the deadline by over two months as the Labour government has not finalised key details for their implementation.

The Financial Accountability Regime (FAR) was passed by parliament in September in direct response to the recommendations of the Hayne royal commission and imposes financial penalties on top bankers that are involved in breaches of the FAR Act.

It was due to replace the Banking Executive Accountability Regime (BEAR) on March 15. But details, including the specific executive positions that will be considered “accountable persons” under the regime, depend on ministerial rules that have not been released by Assistant Treasurer and Financial Services Minister Stephen Jones.

Under the new regime, any individual, including an “accountable person”, may be liable for penalties of up to $1.6m if they are directly or indirectly concerned with a breach of FAR by their bank.

“Given that the minister rules are in the process of being finalised, APRA and ASIC recognise that industry may require additional time, beyond the commencement date, to finalise compliance with the new FAR requirements,” the regulators wrote in a letter to banks on Monday.

The FAR rules will mostly resemble BEAR rules, with some enhancements. They include a requirement to register “accountable persons” with the regulators and notify them within 30 days, of whether any accountable entity or person has breached their obligations under the FAR.

In their joint letter, the regulators said that notwithstanding the ministerial rule delay and “given the guidance currently available, we expect entities to submit their registration applications and to make relevant notifications to us as promptly as possible, and by no later than 30 June 2024.”

Unlike the APRA-administered BEAR regime, FAR will be administered by both APRA and ASIC. It will also apply to insurers and superannuation funds from 2025.

The government had already consulted on ministerial rules from September to October 2022. That included consultation on the responsibilities and positions that would deem a person subject to the FAR, among other details.

But, it is understood that extra feedback during another round of consultation after the legislation was passed last year has delayed the finalisation of the rules.

“The government is committed to genuine consultation so that regulation is proportionate. Feedback was received on the draft minister rules and regulator rules, and the government and regulators are actioning that input, with both sets of rules to be finalised before 15 March,” a spokeswoman for Mr Jones said.

“Independently of the rules, from 15 March banks will be required to comply with important accountability obligations to act with honesty and integrity, with due skill, care and diligence.

“This also means individuals that are deemed to have assisted in contravening their entity’s civil penalty provisions can be subject to a maximum individual civil penalty of up to 5000 penalty units (currently over $1.5m).”

APRA and ASIC said once the minister rules are released, they regulators would publish their own guidance.