Cth Releases Draft Financial Accountability Regime Bill 2021
Thursday 29 July 2021 @ 1.40 p.m. | Legal Research
The Federal Government has released the [Draft] Financial Accountability Regime Bill 2021 (Cth) (“the Draft Bill”) for public comment and feedback.
The Draft Bill proposes the establishment of the Financial Accountability Regime ("the Regime"). This follows the recommendations made in the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry ("the Royal Commission"). The Royal Commission and its interim report was discussed in an earlier TimeBase article.
Submissions on the Draft Bill and its explanatory materials are currently open.
The Draft Explanatory Materials summarises that:
The introduction of the Regime follows the introduction of the Banking Executive Accountability Regime ("the BEA Regime") under the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Act 2018 (Cth), which commenced in 1 July 2018. The Draft Explanatory Materials explains:
"The Banking Executive Accountability Regime is an accountability framework for directors and senior executives of authorised deposit-taking institutions (entities that carry on banking business) and their subsidiaries."
The Royal Commission made a number of recommendations regarding the extension of the BEA Regime to other industries regulated by APRA, and to have this new extended regime be jointly administered by APRA and ASIC.
The BEA Regime and the draft of its originating Bill was discussed in an earlier TimeBase article.
Summary of the Proposed Legislation
The Draft Explanatory Materials summarise that the Regime would seek to impose four core sets of obligations:
- "accountability obligations—which require entities in the banking, insurance and superannuation sectors and their directors and most senior and influential executives to conduct their business in a certain manner;
- key personnel obligations—which require entities in the banking, insurance and superannuation sectors to ensure that all areas of their operations and those of their group are attributed to directors and most senior and influential executives that are regulated by the Regime;
- deferred remuneration obligations—which require entities in the banking, insurance and superannuation sectors to defer at least 40 per cent of the variable remuneration (for example, bonuses and incentive payments) of their directors and most senior and influential executives for a minimum of 4 years, and for their variable remuneration to be reduced where accountability obligations are breached; and
- notification obligations—which require:
- entities in the banking, insurance and superannuation sectors to meet the core notification requirements to provide the Regulator with certain information about them and their directors and most senior and influential executives; and
- for entities above a certain threshold, which will be determined by rules made by the Minister under the [proposed] Bill, those entities will need to prepare and submit accountability statements and accountability maps."
Who will be affected by the new Legislation?
If passed, the proposed Regime would apply to authorised deposit taking institution, as well as their related authorised non-operating holding companies.
However, the Regime could be additionally applied to any class of financial institutions in the future, including to insurers and other registrable superannuation enttity licensees.
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[Draft] Financial Accountability Regime Bill 2021 (Cth) and additional explanatory materials available from TimeBase's LawOne Service.