Australia’s FAR Update
What next for Australian Banking regulations?
It is beginning to look like 2021 is going to be the year of the accountability regime. Financial regulators in Ireland, Australia and Singapore are all expected to finalise or implement their respective legislation, with Australia’s Financial Accountability Regime (FAR) and Ireland’s Senior Executives Accountability Regime (SEAR) both expected to rely heavily on the Senior Managers & Certification Regime (SM&CR) that has already been implemented in the UK. Both Ireland and Australia have seen several high-profile banking scandals in the news, which has ensured the impetus for these regulatory frameworks has remained very high.
In Australia, and after years of investigation, ARPA’s closing of its investigation into money laundering in Australian Banks may have been seen as a failure of the Banking Executive Accountability Regime (BEAR), which already applies to authorised deposit-taking institutions. Many commentators expected the full force of BEAR to brought to bear, with the regulation having the power to disqualify senior executives from office and be used as evidence in criminal proceedings. The fact that The Australian Prudential Regulation Authority (APRA) closed its investigation into possible breaches of the Banking Act 1959, including BEAR, without finding any evidence of wrongdoing, whilst at the same time implementing an additional AU$1billion operational risk capital add-on for Westpac, shows just how hard regulators find bringing individuals to account, even when there are clear systemic issues.
FAR will extend BEAR out to all APRA-regulated entities. But it is also expected to tighten accountabilities by introducing SM&CR style defined responsibilities and will also define who an accountable person is. As well as increasing the maximum penalties that can be imposed on entities, the regulation is also expected civil penalties for accountable persons. The regulator will hope, that if another scandal is on the horizon, these steps will make it easier to bring justice to bear.