FAR update | ASIC and APRA release information package

6 minute read  11.10.2023 Kate Hilder, Siobhan Doherty

APRA and ASIC will jointly administer the FAR, coordinating closely to streamline reporting through a single portal, APRA Connect, while ensuring consistent monitoring, investigation, and communication regarding FAR compliance and enforcement.

Key takeouts

  • Approach to joint administration of the FAR:
    • APRA and ASIC which together will jointly administer the FAR, plan to coordinate closely with each other to minimise duplication and alleviate the additional reporting burden on entities as far as possible. To this end, FAR reporting will take place through a single portal – APRA Connect – and entities will also have a single point of contact for communicating with the regulators on FAR-related matters.
    • Likewise, the regulators plan to collaborate closely when it comes to monitoring FAR compliance as well as undertaking investigation and/or enforcement activity and communicating their expectations to industry.
  • The regulators have also released an information paper outlining the steps they expect ADIs to take in the lead up to the commencement of the FAR, including the information ADIs are expected to submit in the short term (ie from November 2023). As yet no specific dates/specific details around how the information is to be submitted have been provided – though the regulators have indicated the information will be made available soon (once the Regulator Rules and Transitional Rules for ADIs and the Key Functions Descriptions that were released for consultation on 20 July 2023 have been published in final form).
  • ADIs must continue to comply with the BEAR in the period leading up to the FAR commencing.

What is the FAR and when will it apply?

The Financial Accountability Regime (FAR) will replace and expand on the existing Banking Executive Accountability Regime or BEAR.

Broadly, the FAR will extend strengthened, but BEAR-like accountability requirements to other APRA-regulated entities and to the directors/senior executives of those entities in accordance with the government's response to several Hayne Commission recommendations (Hayne Recommendations 3.9, 4.12, 6.6, 6.7 and 6.8).

The aim of the FAR is ultimately to strengthen and increase individual and entity level accountability across the financial services sector, including for non-financial conduct risk.

Unlike the BEAR which is administered by the Australian Prudential Regulation Authority (APRA), the FAR will be jointly administered by APRA and the Australian Securities and Investments Commission (ASIC) (the regulators).

The FAR will apply to authorised deposit-taking institutions (ADIs) and their authorised non-operating holding companies (NOHCs) from 15 March 2024 and to insurance entities, their licensed NOHCs, and superannuation trustees from 15 March 2025.

For more on the FAR see: FAR status update: FAR Bills now law

Information package released

Ahead of the commencement of the FAR, the regulators have released:

We provide a brief overview of the key points below.

Joint administration of the FAR: How APRA and ASIC intend to administer the new regime

The starting point for the agreement between the regulators is that they aim to collaborate to ensure the FAR is administered as efficiently and consistently as possible, with minimal duplication of effort.

To this end, the agreement is underpinned by the following four principles for 'effective collaboration':

  • 'support and harness each Regulator’s mandate and strengths for effective joint administration of the FAR;
  • leverage supervision and surveillance frameworks already established by the Regulators;
  • focus on risks that impede strong and clear accountability; and
  • be accountable and transparent in the joint administration of the FAR'.

Beyond this, the agreement covers:

  • The broad delineation of responsibility between the regulators:
    • ASIC will (generally) focus on the 'impacts to market integrity and consumer protection in the financial system and payments system'.
    • APRA will 'focus on impacts to the prudential soundness of regulated entities as well as the financial stability of the overall system'.
  • Approach to monitoring and supervision under the FAR:
    • The regulators intend to take a 'risk based and outcomes focussed approach' to monitoring of accountable entities and accountable persons including through: surveillance, engagements, reviews and resolving technical queries.
    • Monitoring/supervisory activities may be undertaken together or independently of each other – the agreement states that the regulators plan to 'collaborate and coordinate on these regulatory activities when there is joint interest on a FAR-related risk area', but may take an 'independent but coordinated approach' where this is more appropriate.
    • The agreement also commits the regulators to 'keeping each other informed and when resolving these issues with entities, will work together as appropriate'.
  • Arrangements to facilitate streamlined communication and reporting:
    • FAR reporting: There will be no need for accountable entities to report separately to the regulators, rather FAR reporting – eg registration of accountable persons, lodgement of accountability maps/statements and other notifications including breach reporting - will be done through APRA Connect
    • The register of accountable persons will also be maintained through APRA Connect.
    • The agreement also flags plans to establish a single point-of-contact to enable accountable entities to contact the regulators about FAR reporting obligations or other matters.
    • The Regulators plan to put in place information sharing mechanisms, including establishing a dedicated single portal, to support timely exchange of FAR-related information with each other, with a view to avoiding duplicative information requests.
  • Investigations and enforcement of the FAR:
    • The Regulators also plan to work together on FAR investigations and enforcement.
    • Prior to the commencement of an investigation, they will identify the objectives of the investigation and establish the role of each regulator, including the appropriate lead.
  • Communication with industry about FAR-related matters:
    • Industry communication about FAR-related matters may be released jointly or individually by the regulators.
    • The regulators plan to inform industry about minimum expectations for compliance with FAR obligations and support compliance through publication of: better practice examples, the publication of thematic review findings and details of enforcement activity
    • The regulators also plan to disclose accountable person disqualifications made under the FAR, 'to facilitate industry governance of accountable persons'. However, the agreement states that 'no further information from the FAR register is intended to be published at this time'.

Pre-commencement arrangements for ADIs

The regulators have released a joint information paper for ADIs - RG 278 ADIs: Transitioning to the Financial Accountability Regime. Broadly, RG 278 covers:

  • Registration of accountable persons (APs): Existing APs (ie APs already registered under the BEAR) will automatically transition to being registered APs under the FAR but additional information is likely to be required – the information paper offers guidance around this. The information paper also includes information on: the process for new accountable person registrations; requirements for filling temporary and unforeseen vacancies; and how ADIs should assign key functions to APs.
  • Guidance for 'enhanced ADIs' around the preparation of accountability statements and maps (which 'core' entities are not required to submit to the regulators)
  • Guidance on notification obligations under the FAR for 'enhanced' and 'core' entities.
  • Guidance on the application of FAR to corporate groups including how ADIs are expected to identify their Significant Related Entities (SREs) and the preparation of accountability statements and maps for individuals who are APs for multiple entities within the same corporate group
  • Deferred remuneration obligations and other transitional matters.

Practical steps

The information paper also provides an overview of the steps ADIs (and their authorised NOHCs) are expected to take to transition from the BEAR to the FAR between now and 15 March 2024.

As a first step, all ADIs are expected to determine their entity profile - whether they are an ‘enhanced’ (larger/complex ADI) or ‘core’ entity (as this will determine which FAR obligations they are subject to). The thresholds for determining whether an ADI is an enhanced or core entity are set out in Part 3 of the (as yet still draft) Minister's rules.

Having done this, the information paper highlights the following five other 'key activities', enhanced ADIs are expected to undertake:

  • 'identifying which of its subsidiaries will become Significant Responsible Entities (SREs
  • allocating additional prescribed responsibilities to existing or new accountable persons
  • allocating all applicable key functions to the relevant accountable persons
  • updating/preparing the accountability statements of existing or new accountable persons; and
  • updating its accountability map'.

For smaller and more 'simple' or 'core' ADIs with no subsidiaries, preparation is expected to be less involved. The regulators expect this group of ADIs to:

  • allocate 'additional prescribed responsibilities to existing or new accountable persons';
  • allocate 'all applicable key functions to the relevant accountable persons'
  • update its 'internal accountability documentation'.

Information to be provided to the regulators in the short term

The regulators have flagged that from November 2023, ADIs will be asked to provide the following information, via APRA Connect:

  • entity profile information, including whether the ADI is classified as an enhanced or core entity, whether it is sole or dual-regulated, and its nominated significant responsible entities (SREs)
  • drafts of the additional information to be included in the FAR register for existing APs under the BEAR who will transition to being APs under the FAR, as well as draft registration information for any new accountable persons to be registered under the FAR for initial feedback from the regulators (ahead of formally submitting the updated information)
  • (for enhanced entities only) updated draft accountability maps and accountability statements for feedback (ahead of formally submitting the updated information)
  • At this stage, the regulators have released an ADI accountability statement template (and guidance) to assist in this.

Further detail to come

The regulators plan to provide further details, including hard timelines/more detailed instructions for submitting this information, once the Regulator rules and Transitional rules as well as Key Functions Descriptions on which the regulators recently consulted are published in final form. For more on the draft Rules/Key Functions see: FAR status update: Regulators consult on FAR implementation

The Regulators plan to host ADI and industry briefings from October 2023.

[Sources: Joint ASIC/APRA media release 03/10/2023; Financial Accountability Regime Information Package]

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