The Australian Prudential Regulation Authority (APRA) has released an information paper detailing the findings from its review of the implementation of the Banking Executive Accountability Regime (BEAR) by three of Australia’s largest authorised deposit-taking institutions (ADIs).

APRA has published the key elements of the feedback provided to the large ADIs from its review to share examples of better practice with all stakeholders.

The thematic points identified by APRA in its review of the large ADIs, are
summarised as follows:

• The large ADIs could benefit from better monitoring the actions taken by accountable persons to fulfil their accountability obligations. To date, APRA observed that these ADIs had different levels of understanding about the actions being taken by individual
  accountable persons to fulfil their obligations;
• Non-executive accountable persons could reflect on whether the ADI’s governance arrangements and their individual practices enable them to demonstrate how they, and the ADI, are meeting their accountability obligations. The board performance assessment
  may be a useful tool to demonstrate that BEAR obligations are being met; and
• Executive accountable persons could consider how they can more deliberately align their actions and records with the ADI’s expectations about what constitutes reasonable steps to deliver accountability obligations. This process could be supported by routine monitoring and assurance to inform the ADI about the actions taken.

APRA completed its implementation review of the BEAR at Australia and New Zealand Banking Group Limited (ANZ), Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) in February 2020.

APRA’s review found that all three of the large ADIs had designed adequate frameworks to implement the BEAR.

Westpac Banking Corporation was not included due to an ongoing investigation into potential breaches of the Banking Act 1959. APRA delegated its enforcement powers in connection with the investigation to ASIC. NOTE: On 23 December 2020, Westpac informed the ASX that ASIC had informed it that it has concluded the investigation and that it does not intend to take enforcement action against Westpac or any individuals in connection with the investigation.

As at February 2020, APRA considered that CBA had the most developed approach to implement the BEAR, but that all of the ADIs had further work to achieve clearer and more transparent accountability practices.

APRA says that all of the ADIs have taken actions and made commitments to address the feedback received. This includes actions and commitments to increase support for implementation of the BEAR, to enhance the use of scenario testing to clarify roles and responsibilities, and to further integrate their breach and consequence management framework with their remuneration frameworks. APRA will assess the effectiveness of these actions and outcomes, and will continue to monitor progress through its ongoing supervisory activities.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.