The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 was passed by the Senate on 7 February and will become law.  The Treasurer stated that the passage of the Bill delivered on the government's 'promise to hold banks and their senior executives to account, with tougher consequences if expectations are not met'.

 Key Points

• The Bill will implement the Banking Executive Accountability Regime (BEAR).  The BEAR is an enhanced accountability framework for authorised deposit‑taking institutions (ADIs) (banks) and persons in director and senior executive roles.   It is intended to strengthen the accountability obligations of ADI groups and their directors and senior executives, and to impose enhanced consequences for being in breach of these obligations.   To support the BEAR, the Bill gives the Australian Prudential Regulation Authority (APRA) new and strengthened powers.  In particular, APRA will be empowered to: impose substantial fines on banks; more easily disqualify accountable persons; and ensure that banks’ remuneration policies result in financial consequences for individuals.

• Defer commencement for small and medium-sized ADIs to 1 July 2019: The Bill was passed with one substantive amendment: to defer the commencement of the measures for small and medium-sized banks to 1 July 2019 (instead of 1 July 2018).  The commencement date for large ADIs remains unchanged from the date originally proposed: 1 July 2018.  Commenting on the change, the Treasurer stated that deferring commencement for small and medium ADIs is 'appropriate' given that they do not have the same  operational resources as large ADIs, to comply with the new requirements.   Requiring large ADIs to comply by 1 July 2018 is necessary, the Treasurer stated to 'ensure that accountability gaps in the sector are addressed as soon as possible'. 

• Plans to consult on draft legislative instrument: The Treasurer has indicated that that the government will shortly consult on a draft legislative instrument defining small, medium and large ADIs for the purpose of the BEAR. 

[Note: The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 (BEAR Bill) was introduced into the House of Representatives on 19 October following a short consultation, and was referred to the Senate Economics Legislation Committee for report.  The Committee recommended that the government delay the date of implementation to start 12 months after the bill was passed (rather than commencing on 1 July) and subject to this, recommended that the Bill be passed.] 

[Sources: Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017; Revised Explanatory Memorandum; Treasurer Scott Morrison Media Release 07/02/2018]

 Progress of related Bills

The BEAR Bill is part of a broader financial reform package.  A brief update on the status of two related Bills is below. 

• Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2018: The was introduced into the House of Representatives on 19 October and is yet to pass either House.  The Bill was referred to the Senate Economics Legislation Committee on 16 November and the report, released on 09 February, recommended that the Bill be passed. 

• Treasury Laws Amendment (Banking Measures No. 1) Act 2018: The Bill was also introduced into the House of Representatives on 19 October and passed the House on 7 February.  It is currently before the senate. 

[Sources: Treasury Laws Amendment (Banking Measures No. 1) Act 2018; Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2018; Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017 [Provisions] Report 09/02/2018]