The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 was passed by the House of Representatives on 5 February 2018 with one amendment. The BEAR Bill will now be considered by the Senate. Background.

UPDATE 7 February 2018: The Bill has been passed by the Senate and is awaiting Royal Assent.

UPDATE 20 February 2018: Royal Assent given.

The Bill is scheduled to commence on 1 July 2018.

The Bill has been amended to reduce the implementation burden for small and medium authorised deposit-taking institutions (ADI’s) by deferring the commencement date for certain obligations of small and medium ADIs to 1 July 2019.

The Treasurer has announced that the Government intends to make a legislative instrument defining small, medium and large ADIs for the purpose of the BEAR.

It is expected that an ADI will meet the definition of “large” when its total resident assets exceed $100 billion on a 3 year average.

The Revised Explanatory memorandum says there are 4 large ADIs, 20 medium ADIs and 125 small ADIs.

In summary, the BEAR establishes:
• a class of directors or executives of ADIs that are defined as ‘accountable persons’;
– accountable persons are defined as holding actual or effective senior responsibility for the management and control of the ADI or a significant or substantial part of the ADI and by reference to particular responsibilities;
• a requirement for all accountable persons to be registered with APRA;
• various obligations that an ADI or accountable person must comply with including ‘accountability obligations’ and ‘key personnel obligations’;
• a requirement for a minimum proportion of the variable remuneration of an accountable person to be deferred and potentially reduced if the accountable person fails to meet their obligation;s and
• a civil penalty regime for ADIs that applies if an ADI fails to comply with its obligations.

Registration of accountable persons
The BEAR requires that all accountable persons be registered with APRA. A person is prohibited from being an accountable person if they are not registered.

The Bill allows 90 days from commencement for accountable persons in place at the commencement to be registered.

Deferred remuneration obligations
The Bill introduces requirements that a proportion of an accountable person’s variable remuneration be deferred so that it can be reduced (‘clawed back’) in the event that the individual fails to satisfy their accountability obligations.

The Bill details the minimum amount of variable remuneration that must be deferred. The amount varies based on the size of the ADI. The amount is:
• for large ADIs, the lesser of 40 per cent of the accountable person’s variable remuneration or 20 per cent of their total remuneration; or if the accountable person is the Chief Executive Officer, 60 per cent of their variable remuneration or 40 per cent of their total remuneration
• for medium ADIs, the lesser of 40 per cent of the accountable person’s variable remuneration or 20 per cent of their total remuneration
• for small ADIs, the lesser of 40 per cent of the accountable person’s variable remuneration or 10 per cent of their total remuneration.

Transition Timetable

ADIs must have remuneration policies that comply with the requirements in place by 1 July 2018.

The new remuneration requirements under the BEAR apply only where the decision to grant the variable remuneration to the person is made on or after 1 July 2019. However, if variable remuneration is payable to a person under an existing remuneration contract (entered into before the date of Royal Assent), then the new remuneration requirements do not apply until 1 July 2020.

APRA may, by legislative instrument, determine transitional arrangements for accountability maps and accountability statements which apply for a period of up to 18 months from commencement of the BEAR.

Small and medium ADI’s

The relief for small and medium ADI’s is as follows:

• If, immediately before commencement, a person held a position, in or relating to a small or medium ADI or a subsidiary of small or medium ADI, that causes the person on commencement to be an accountable person of that ADI or subsidiary, they do not need to be registered as an accountable person until the end of the period of 90 days after 1 July 2019;
• transitional requirements determined by APRA in relation to accountability statements and accountability maps will not apply in relation to a medium ADI, or a small ADI, until on and after 1 July 2019.