Financial Accountability Regime: Bills (re)introduced

3 minute read 08.09.2022 Kate Hilder, Siobhan Doherty

The long-awaited Bills to established the proposed FAR were (re)introduced into the House of Representatives on 8 September 2022

What is the FAR?

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

Two Bills introduced

On 8 September 2022, the government introduced two Bills – the Financial Accountability Regime Bill 2022 (FAR Bill) and the Financial Sector Reform Bill 2022 (FS Reform Bill) - which together will (if enacted) establish the proposed Financial Accountability Regime (FAR).

No substantive changes from what was previously proposed

The FAR Bill is essentially the same as Bill that lapsed with the dissolution of the last parliament – the Financial Accountability Regime Bill 2021.

The FAR-related aspects of the FS Reform Bill are also unchanged from the lapsed Financial Sector Reform Bill Financial Sector Reform (Hayne Royal Commission Response No 3) Bill 2021 (though the Bill has been retitled).

You can access our detailed summary of the proposed FAR here.

Planned commencement of the proposed FAR

The planned timing of the reforms is also (essentially) unchanged from the timing put forward in the lapsed Bills.

If legislated in its current form, the FAR Bill will commence on the day after it receives Assent.

the FAR will apply to the banking industry six months after commencement of the FAR Bill and to any new entrants beyond that, from the time they become an ADI or a non-operating holding company (NOHC).
the FAR will apply to the insurance and superannuation industries 18 months after commencement of the FAR Bill and to any new entrants beyond that, from the time they become licensed.

Outlook

It is not clear how quickly the legislation to establish the FAR will be enacted. Despite their similarity to the lapsed Bills (from a FAR perspective) it is still necessary that that both Bills proceed through the usual process of enactment.

The earliest possible date from which the FAR would apply (for the banking sector) is March 2023 (assuming the passage of the FAR Bill this month) and March 2024 for the insurance and superannuation sectors. As there are only four remaining sitting days (after today) in September, it seems likely that the commencement date will be after this date.

Both the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission have flagged FAR implementation as a priority in the near-term.