A major focus of the Banking Executive Accountability Regime (BEAR) draft legislation is on ADI’s developing an accountability map to identify potentially liable individuals based on their current roles.
APRA has the power to disqualify ADI “accountable persons” who APRA determines have failed to comply with the Regime’s accountability obligations. The draft Bill does not give a disqualified person the right to review the factual basis of APRA’s decision.
In addition those identified as accountable persons will have a proportion of their remuneration deferred for a period of four years even though there has been no misconduct.
What are the accountability obligations?
The issue for individuals identified as accountable persons will be how they prove they have taken “reasonable steps” to comply with his or her accountability obligations.
The accountability obligations of an accountable person of an ADI, or of a subsidiary of an ADI, are to:
(a) conduct the responsibilities of his or her position as an accountable person with honesty and integrity, and with due skill, care and diligence; and
(b) deal with APRA in an open, constructive and co-operative way; and
(c) take reasonable steps in conducting those responsibilities to prevent matters from arising that would adversely affect the prudential standing or reputation of the ADI.
Identifying responsibilities
BEAR requires that ADIs give APRA accountability statements detailing the roles and responsibilities of each accountable person as well as accountability maps allocating the roles and responsibilities of accountable persons across the ADI and its subsidiaries.
It is not clear how these responsibility maps will work in organisations where there are shared accountabilities which do not precisely reflect the list of responsibilities identified in BEAR.
The draft Bill states that “If more than one of the accountable persons of an ADI or a subsidiary of an ADI have the same responsibility … all of those accountable persons have the accountability obligations jointly in relation to that responsibility.”
APRA may direct an ADI to reallocate a responsibility of an accountable person.
At APRA’s direction ADI’s currently maintain the three lines of defence model: is the liability for a compliance breach a collective corporate liability or the personal liability of the chief executive, senior manager or the compliance officer? The draft Bill suggests that it is a joint liability.
As BEAR will increase the personal accountability of ADI managers and affect their income, developing an accountability map requires the managers of ADI’s and their subsidiaries to clearly identify their individual responsibilities and the “reasonable steps” they need to take to prevent adverse matters arising.
This will be an important discussion for ADI’s and managers.
