The Treasurer has introduced into the House of Representatives three Bills which will establish the Banking Executive Accountability Regime, expand APRA’s crisis management powers and give APRA new rule-making and data collection powers over non-bank lenders. The restriction on use of the words “bank”, “banker” or “banking” in relation to an ADI’s financial business is also removed.
The Bills are:
Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017
Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill
Treasury Laws Amendment (Banking Measures No. 1) Bill 2017
Banking Executive Accountability
The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 will implement the Banking Executive Accountability Regime. Background.
ADIs will be required to register their “accountable persons” with APRA and clearly allocate responsibilities to accountable persons via accountability statements and accountability maps. These steps will ensure that APRA has greater visibility of the most senior persons in ADI groups in order to more easily assign accountability should there be a breach of the BEAR obligations.
ADIs will be required to defer minimum amounts of their accountable persons’ variable remuneration for a period of four years. The amount to be deferred will vary with the size of the ADI.
The Bill also contains provisions for reductions in variable remuneration where an accountable person fails to comply with their accountability obligations.
The Bill provides APRA with enhanced disqualification powers. APRA will be able to disqualify an accountable person directly, without needing to apply to the Federal Court. Accountable persons will be able to seek merits review and judicial review of APRA’s decisions.
For ADIs, the bill introduces substantial new civil penalties, of up to $210 million for large ADIs, $52.5 million for medium-sized ADIs and $10.5 million for small ADIs, where an institution breaches any requirements of the BEAR that relate to prudential matters.
The BEAR will commence on 1 July 2018, with transitional arrangements for certain elements of the regime.
UPDATE: Senate Economics Legislation Committee report.
UPDATE: Transition timetable
APRA Crisis Resolution Powers
The Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017 gives APRA clear powers to make prudential standards for planning for crisis resolution as well as powers to enforce them.
UPDATE February 2018: Bill passed.
Use of word “bank”
The Treasury Laws Amendment (Banking Measures No. 1) Bill 2017 inserts a new section 66(1AC) in the Banking Act so that it will no longer be an offence for an ADI to assume or use the words ‘bank’, ‘banker’ or ‘banking’ in relation to the ADI’s financial business. Background.
UPDATE February 2018: Bill passed.
Regulation of non-ADI lenders
The Treasury Laws Amendment (Banking Measures No. 1) Bill 2017 also gives a new reserve power to APRA to make rules with respect to provision of finance by non-ADI lenders, for the purpose of addressing financial stability risks. APRA will also be provided a power to issue directions to a non-ADI lender, in the case that it has contravened, or is likely to contravene, a rule.
These powers do not equate to ongoing regulation by APRA of non-ADI lenders. APRA will not prudentially regulate and supervise non-ADI lenders as it does ADIs. APRA’s power over non-ADI lenders will lie dormant until such time as the provision of finance by non-ADI lenders materially contributes to risks of financial instability.
