APRA’s takeaways from BEAR’s initial implementation

Clear accountability is the necessary foundation for any institution in establishing and promoting good governance and a strong risk culture.

That’s the message from the Australian Prudential Regulation Authority (APRA) in an information paper released in October to help authorised deposit-taking institutions (ADIs) meet their obligations under the Banking Executive Accountability Regime (BEAR).

The paper is based on APRA’s experience in implementing BEAR for the largest banks for which it has applied from 1 July 2018.

The paper will now help all the other ADIs implement the regime before it comes into force for them from 1 July 2019.

BEAR legislation, enacted in February 2018, establishes clear and heightened expectations of accountability for ADIs, their directors and senior executives, and sets out clear consequences in the event of a material failure to meet those expectations.

In its information paper, APRA says it expects ADIs to take ownership of a carefully considered and thorough implementation of BEAR. This requires honest discussion to build a clear, transparent and common understanding of who is accountable, what action is expected, and how consequences will be applied for any failure to meet obligations.

 ‘Taking a considered approach, an ADI may need to review end-to-end business processes and identify any gaps, areas of overlap or points of handover that may need clarification, ‘ says APRA.

 ‘Implementation of the accountability regime presents an opportunity to establish and refine frameworks and practices that, when cascaded down throughout the institution, strengthen risk culture in practice at all levels. ‘

In satisfying the requirements of the accountability regime, APRA says it’s important to note that there is no single solution prescribed by the legislation.

 ‘An institution must identify accountable persons, submit accountability statements and form an accountability map that reflects its own understanding among its senior executives and directors of how accountability works in practice within the organisation, ‘ says APRA.

 ‘The way the accountability regime is implemented may vary from institution to institution. ‘

APRA adds that accountable persons must be involved early and deeply in the process as they must meet personal obligations and ultimately bear the risk of breaches.

APRA describes BEAR as a dynamic regime that will continue to evolve over time. Through its ongoing supervision, it says it will review and challenge how an ADI is refining its frameworks and practices in order to effectively establish clear and strong accountability, as well as how that accountability can both support and be supported by appropriate governance, and together, drive strong risk culture from the top down throughout a financial institution.

APRA adds that it will address enforcement-related issues, including the disqualification of accountable persons and civil penalties under the BEAR, in a subsequent paper.

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