On 28 June 2019, the Australian Prudential Regulation Authority (APRA) released a consultation letter outlining its proposed approach to implementing Financial Services Royal Commission Recommendation 1.17, end-to-end product accountability under the Banking Executive Accountability Regime (BEAR). 
APRA proposes requiring ADIs to identify and register an accountable person to hold end-to-end product responsibility for each product the ADI offers to its customers, including retail, business and institutional customers. 
The consultation closes on 23 August 2019.

Request for feedback on proposed implementation

APRA seeks feedback on four key considerations relating to implementing the following proposed product responsibility requirements.

1. The scope of accountability: APRA proposes a broad interpretation of what is in scope of end-to-end accountability, including not only all steps in the design, delivery and maintenance of all products offered to customers by an ADI or ADI group but also extending to issues such as customer remediation, linkages to IT systems and data quality, outsourcing, and incentive arrangements.   APRA says that this goes beyond 'an explicit consideration of processing and administrative errors, and including but not limited to expansion to customer experience and outcomes'.
2. Product coverage — the new accountability should apply to all products: APRA proposes that a single-point accountability for a given product would be required for all products offered by an ADI or ADI group, rather than just retail products, as both retail and other products have the potential to impact the prudential standing and prudential reputation of an ADI. This would include but not limited to products, services, white-label or other-branded products.
3. The structure of the legal mechanism: APRA proposes that for the purposes of paragraph 37BA(2)(b)(ii) of the Banking Act 1959 (Meaning of accountable person), a new particular responsibility should include senior executive responsibility for end-to-end product management of a product or product group offered by the ADI (or the relevant  group of bodies corporate that is constituted by the ADI and its subsidiaries), including but not limiting to all steps in the design, delivery, maintenance and any necessary remediation of customers in respect of any such product/product group.  An ADI would be  expected to reflect this responsibility for a given product or product group in the individual accountable person's accountability statement and also to have it clearly delineated in the institution's accountability map.
4. The application of joint accountability within ADIs and ADI groups: APRA proposes that, where more than one accountable person is identified as accountable for a given product or product group, joint accountability is applied to the accountable persons involved to ensure 'no gaps or dilution in the end-to-end accountability' ie all relevant accountable persons will be equally accountable for that given product or product group.  APRA adds that this joint accountability should not be taken to apply automatically across different identified products or product groups.

Other matters: In addition, the letter requests feedback on how many products/product groups ADIs would be likely to have and how many accountable persons would be likely to hold the proposed end to end product responsibility within ADIs as well as feedback generally on 'any area' that may impact the objective of achieving 'heightened and clarified end-to-end accountability for each product',

Not the CEO?

APRA writes that as the core objective of the changes is to deliver 'heightened and clarified end to end product accountability among senior executives for their products', APRA does not consider it appropriate for the CEO to hold end-to-end accountability for all of its products, except for smaller/less complex ADIs.  

Broader relevance?

APRA says that though the requirements are directly applied to locally incorporated ADIs, APRA 'strongly encourages all ADIs to consider elements of strengthened product accountability as they relate to their accountable persons, and accountability statements and map'.

APRA adds that given the government's plans to extend the BEAR regime to the insurance and superannuation sectors, 'all APRA-regulated entities may have an interest in providing feedback on the proposed approach'.

Timeframe

• Consultation will close on 23 August 2019.   
• APRA aims to release a draft schedule with the proposed product responsibility requirements for further consultation in October 2019, and the final legislative instrument in December 2019.  
• APRA expects to implement the new requirements by 1 July 2020.

[Sources: APRA Media release 28/06/2019; Letter: The Banking Executive Accountability Regime - Consultation on product responsibility]