BILLS DIGEST NO. 70, 2017–18              2 February 2018

Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017

Phillip Hawkins and Helen Portillo-Castro
Economics Section 

Date introduced:  19 October 2017

House: House of Representatives

Portfolio:  Treasury

Commencement: The majority of the provisions in the Bill commence on 1 July 2018. Schedule 1, item 14 commences on 1 July 2023 and Schedule 1, items 7 and 9 commence on the later of 1 July 2018 or the commencement of item 4 of Schedule 1 to the Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2017.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at February 2018.

Purpose of the Bill

The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 (the Bill) proposes to amend the Banking Act 1959 and the Australian Prudential Regulation Authority Act 1998 (APRA Act) to:

•       apply new accountability obligations to senior executives of authorised deposit-taking institutions (ADIs)[1] and

•       introduce a civil penalty regime alongside enhanced powers for the Australian Prudential Regulation Authority (APRA) to rely on in the event ADIs and certain accountable persons fail to meet the new obligations.

Structure of the Bill

The Bill is divided into two Schedules:

•       Schedule 1 sets out the amendments to the Banking Act and the APRA Act and the application of those amendments to ADIs and accountable persons.

•       Schedule 2 amends APRA’s examination powers in the Banking Act and introduces penalties and offences for failure to comply with an APRA investigation under those powers.

Background

In recent years—and particularly since the global financial crisis—there has been a growing perception that bank executives have not been held accountable for the numerous financial scandals which have resulted in financial detriment to individuals and the community. The banking sector has become subject to routine parliamentary scrutiny,[2] and the Government announced a Royal Commission into the banking industry in December 2017.[3]

The first report of the House of Representatives Economics Committee Review of the Four Major Banks specifically recommended regulatory intervention to ensure senior executives are held responsible for the failures in their divisions.[4] The Committee reaffirmed this recommendation in its second report of 21 April 2017 (the Coleman Report).[5] The Committee noted numerous examples of impropriety by the major banks, including poor financial advice, mishandling of insurance claims, poor management of hardship support and banks improperly collecting fees. In the view of the Committee, no executives had sufficiently been held to account for these actions.[6]

The Government’s response to the Coleman Report, released on 9 May 2017, agreed in principle with the recommendation and on the same day, the Government, as part of the 2017–18 Budget, announced its intent to legislate the Banking Executive Accountability Regime (BEAR).[7]  In announcing the BEAR, Treasurer Scott Morrison stated:

… [the BEAR will require] all senior executives to be registered with APRA. If in breach, they can be deregistered and disqualified from holding executive positions, and be stripped of their significant bonuses. Banks will also be held to account if they try and hide misconduct by executives with new mandatory reporting requirements. If banks breach misconduct rules, they will also face bigger fines starting at $50 million for small banks and $200 million for large banks.[8]

In his second reading speech for the Bill, the Treasurer emphasised that the purpose of the BEAR is to ensure that it is clear where the accountabilities for actions lie, and where actions fall short of ‘community expectations’ that ‘appropriate consequences’ follow.[9]

Australia’s current prudential regime

According to Treasury, the purpose of the BEAR is to ‘apply a heightened responsibility and accountability framework to the most senior and influential directors and executives within ADIs, rather than replacing or changing the existing prudential framework or directors’ duties [within the Corporations Act 2001]’.[10] The BEAR would apply in addition to existing prudential standards and powers that APRA has in place to address issues of governance, remuneration and the fitness and propriety of senior executives within ADIs.

Relevant existing prudential standards include:

•       Prudential Standard CPS 520 – Fit and proper

–      The fit and proper standard requires that ‘responsible persons’ within an ADI, whose conduct could have a significant impact on the prudential management of the ADI, are assessed by the ADI as fit and proper to hold their position. According to APRA ‘responsible persons’ generally comprise directors who report to the chief executive officer and persons with audit or risk management functions.[11]

•       Prudential Standard CPS 510 – Governance

–      In particular, CPS 510 covers remuneration arrangements for senior executives and other individuals.  The standards require that the ADI have a remuneration policy in place that covers ‘all persons or classes of person whose actions could put the institution’s financial soundness at risk’.[12] This includes ‘responsible persons’ as defined; individuals with responsibility for risk, governance and audit management and control; and any individual who receives a significant proportion of performance-based remuneration. [13]

•       The remuneration policy must enable variable remuneration to be adjusted downwards, to zero if required, to protect the soundness of the ADI or in the case of material risk management breaches, unexpected financial losses, potential reputational damage or significant regulatory non-compliance.

Directors are also required to satisfy ‘directors duties’ under the Corporations Act 2001, including: acting with care and diligence (section 180); acting in good faith (section 181); not improperly using their position for personal advantage or to the detriment of the company (section 182); and not improperly using information for personal advantage or to the detriment of the company (section 183).

APRA also has the power under section 23 of the Banking Act to direct locally incorporated ADIs to remove directors or senior managers of an ADI if they do not meet the requirements of fitness and propriety; and under section 21 of the Banking Act to apply to the Federal Court of Australia to disqualify a person from acting as a director or senior manager.

The BEAR regime proposes to apply additional requirements to senior executives, in particular:

•       It requires senior executives who hold certain responsibilities in the ADI to be registered with APRA as ‘accountable persons’ with their specific accountabilities identified in accountability statements.[14]

•       It requires accountable individuals to satisfy specific accountability obligations. According to the Explanatory Memorandum these accountability standards focus on a narrower group of individuals than existing prudential standards.  They apply to the directors and senior executives responsible for the ‘policies, procedures and systems that influence the overall conduct and culture of ADI groups’.[15]

•       The BEAR places additional obligations on ADIs to ensure that their senior executives comply with accountability obligations and imposes stronger financial penalties on ADIs who fail to meet their obligations.[16]

•       The BEAR strengthens APRA’s ability to remove or disqualify senior executives when they fail to meet their obligations. The disqualification regime under the BEAR does not require APRA to apply to the Federal Court, although APRA’s decision would be subject to judicial review by the Federal Court or merits review by the Administrative Appeals Tribunal (AAT).[17]

•       The BEAR places more explicit requirements around remuneration than currently exist, including a requirement for ADIs to defer a minimum proportion of variable remuneration of senior executives for a period of at least four years, unless APRA approves a lesser period.[18]

For further information on the reforms proposed under the Bill, see Key provisions.

International precedents

The Treasury consultation paper included an appendix detailing the features of the regime in the United Kingdom and the equivalent regulatory approach in Hong Kong.[19]

United Kingdom

The analogous regulation in the UK is the Senior Managers and Certification Regime. The BEAR is modelled in part on this scheme and many of the key aspects are similar.

The aims of the UK regime (as set out on the Financial Conduct Authority website) are to increase individual accountability of executives within the banking sector and to allow regulators to hold senior managers accountable for misconduct within their area of responsibility.

The rules apply to banks, building societies, credit unions, large investment firms that are regulated by the Prudential Regulation Authority and branches of foreign banks operating in the UK.[20] The rules came into effect from 7 March 2016 and will be extended to the entire financial services industry in 2018.[21] A parallel scheme that applies to insurers also came into effect on 7 March 2016.[22]

Under the UK regime, firms are required to:

•        develop a Statement of Responsibilities detailing those responsibilities for which individual managers are personally accountable (this includes a list of ‘prescribed responsibilities’ that must be allocated among senior managers)[23]

•        produce a ‘Firm Responsibilities Map’ which outlines the responsibilities of all senior managers and how these ‘knit together’

•        ensure that all individuals undertaking ‘senior management functions’ are pre-approved by the regulators before carrying out their roles.[24]

The rules also introduce a ‘duty of responsibility’ that requires senior managers to take reasonable steps to prevent a regulatory breach from occurring.[25] The belief is that increased focus on individual responsibility will allow regulators to focus on whether a responsible person took reasonable steps to comply with relevant regulations, rather than tasking the regulator with determining who is accountable.[26]

While similar, the UK SMR differs from the proposed BEAR in a number of ways, for example:

•       The UK scheme has broader coverage applying to insurers and investment banks, it is expected to be broadened to the entire financial services industry in 2018.[27]

•       The conduct rules under the SMR are broader than the proposed accountability obligations under the BEAR. The obligations under the BEAR are prudentially focussed, while the conduct rules apply to market conduct more generally. For example, the UK market conduct rules require a senior manager to act with integrity, observe proper standards of market conduct, and pay due regard to the interests of customers and treat them fairly.[28]

•       The SMR makes executives severally liable for failing to meet their obligations, while the BEAR proposes joint responsibility where one or more senior managers share the same responsibilities (proposed subsection 37CA(2) of the Banking Act, at item 1 of Schedule 1 to the Bill).

•       The UK scheme requires senior managers to take reasonable steps to prevent specific regulatory breaches from occurring, whereas the BEAR imposes a more general requirement to take reasonable steps to prevent matters from arising that would adversely affect the prudential standing or prudential reputation of the ADI (proposed paragraph 37CA(1)(c) of the Banking Act).

While the UK regime has only been in place for less than two years at the time of writing, some have reflected on its impact, and the lessons learned from its implementation.

Mark Carney, Governor of the Bank of England, reflected on the impact of the SMR in a speech to the FICC Market Standard Board on 29 November 2017:

There are encouraging signs that the SMR is already beginning to make a difference.

For firms, it is clarifying and improving governance, accountability and decision-making processes. Senior Managers are increasingly focusing on building cultures of risk awareness, openness and ethical behaviour. In the words of one chair “responsibility for culture has moved to the top of my agenda.”

For supervisors, the regime is helping identify weaknesses in governance and accountability, and to assess the fitness and propriety of senior managers and others in positions of responsibility, and whether the firm has an appropriate culture, and is encouraging the necessary changes.[29]

Sarah Isted of Price Waterhouse Coopers considered the implementation of the SMR and the potential lessons for Australia. She noted that the task of identifying current responsibilities and assigning them to specific accountable persons was more complex than envisaged, due to the complexity of firm structures and the desirability of flexible or changeable roles and responsibilities. The process required affected firms to evaluate, document and strengthen their governance, processes and controls in light of the new regime, a positive development. However, she stressed that sufficient time and regulatory certainty is required to affect these changes.[30]

Hong Kong

Announced in December 2016 and fully implemented in October 2017, the Managers-in-Charge (MIC) initiative in Hong Kong built on an existing regime administered by the Securities and Futures Commission to bolster the regulator’s information collection on regulated entities.[31] The MIC is similar to the proposed BEAR regime in that it requires corporations to submit particulars about individuals in senior management positions, including how their role fulfils specified ‘core functions’ and how the role fits into the organisational structure of the firm. The MIC core functions are broadly equivalent to the particular responsibilities set out in the Bill at proposed subsection 37BA(3) of the Banking Act.[32]

Unlike the proposed expansion of APRA’s supervisory powers under the Bill, the MIC initiative was designed to clarify the application of existing disciplinary powers under Hong Kong’s Securities and Futures Ordinance rather than to broaden the scope of the regulator’s ability to subject senior management to disciplinary action for misconduct.[33] The Securities and Futures Commission website documents cases illustrating the enforcement of the pre-existing regime and disciplinary sanctions available to the Hong Kong regulator.[34]

Committee consideration

Senate Economics Legislation Committee

On 19 October 2017 the Bill was referred to the Senate Economics Legislation Committee (the Economics Committee) for inquiry. The Economics Committee report was released on 24 November 2017. Details of the inquiry are at the inquiry homepage.

In response to concerns by industry and APRA about the lead time to introduce the changes, the Economics Committee recommended that the Government change the implementation date of the BEAR from 1 July 2018 to not less than 12 months after the Bill is passed.[35]

The Economics Committee stopped short of recommending changes to the provision for joint responsibility with regards to accountability obligations— around which stakeholders had expressed concerns—but urged the Government to ‘reconsider whether [such provisions] are necessary’.[36] (For detail on this aspect of the Bill, see the ‘Key issues’ section below.)

Senate Standing Committee for the Scrutiny of Bills

The Senate Scrutiny of Bills Committee (the ‘Scrutiny Committee’) considered the Bill as part of its Scrutiny Digest of 15 November 2017. The Scrutiny Committee raised a number of concerns with the Bill including that the Bill reverses the evidential burden of proof in certain circumstances, removes protections against self-incrimination and raises issues of procedural fairness.[37]

The Treasurer’s response, dated 5 December 2017, addressed these issues by further elaborating on the intent of the provisions in question.[38]

The Scrutiny Committee reconsidered the Bill in its Scrutiny Digest of 6 December 2017 and reiterated some of its concerns. It sought to draw to the attention of Senators the issues surrounding the reversal of the evidential burden of proof,[39] and the removal of protections against self-incrimination.[40]

Policy position of non-government parties/independents

Australian Labor Party (Labor)

The Labor Senators on the Economics Committee indicated support for the legislation but stated that it ‘is no substitute for a Banking Royal Commission’.[41] They further stated that a Royal Commission could ‘consider legislative and regulatory changes from a holistic perspective, resulting in a set of interconnected reforms that complement and enhance each other’.[42]

Labor Senators indicated support for the delayed timeframe recommended by the Economics Committee and have indicated that they will seek amendments to the Bill to further reduce the implementation burden for small and medium ADIs by amending the commencement date for small and medium ADIs to 1 July 2019.[43]

The Australian Greens (Greens)

The Greens Senators on the Economics Committee indicated that the Greens support the BEAR but that they will seek a number of amendments.[44] These amendments include:

•       placing absolute limits on executive remuneration at ten times the average national wage for base remuneration and a further five-times the average wage for variable remuneration[45]

–      based on the Australian Bureau of Statistics latest estimates of full-time adult average weekly total earnings of $1,608.40 per week this would be approximately $840,000 per annum for the base salary component and $420,000 per annum for the variable component[46]

•       varying the maximum penalties under the BEAR based on the size of the ADI so that larger ADIs pay larger fines—reflecting that larger institutions impose greater prudential risks to the economy[47]

–      Senator Whish Wilson has moved an amendment to the Bill that would vary the penalties payable by ADIs based on a rate of 10 penalty units for each $1,000,000 in bank assets.[48]

The Greens also recommended that the Government commit to broaden the BEAR to the entire financial sector in the future. [49]

Liberal Democratic Party (LDP)

The LDP issued a dissenting report to the Senate Economic Committee report stating that it opposes the Bill on various grounds but particularly on the basis that in the party’s view, ‘it is not a legitimate exercise of government authority to seek to ensure particular businesses meet community expectations. This is a matter for the market.’[50]

Position of major interest groups

A number of industry stakeholders raised concerns about the Bill. The specific stakeholder views are discussed in the ‘Key issues’ section of this digest. The Senate Economics Committee report summarised a number of stakeholder concerns in detail in its Final Report on the Bill. This Bills Digest does not cover all these issues but summarises a few of the key ones.

As noted by the Economics Committee, industry stakeholders—including the Australian Bankers’ Association (ABA) and the Customer-owned Banking Association (COBA) as well as individual ADIs—have raised particular concerns about the proposed implementation deadline of 1 July 2018.[51] COBA, which represents a number of small and medium ADIs, recommended that the commencement of the BEAR for small and medium ADIs should be two years after the commencement for larger ADIs.[52] APRA also stated that implementing the BEAR by the proposed 1 July 2018 deadline ‘will be challenging’.[53]

Evidence presented to the Economics Committee suggests that at least two of the four major banks have commenced preparation for implementing aspects of the regime, such as accountability mapping, in anticipation that the Bill will become law.[54]

Financial implications

Over the forward estimates period from 2017–18, APRA has been allocated $4.2 million to implement the new BEAR and will receive an additional $1 million per year ‘to build up its contingency enforcement fund’.[55] This funding is to be offset by an increase of $8.2 million over four years in the APRA Financial Institutions Supervisory Levies.[56] See Table 1 for a breakdown of how the $4.2 million funding allocation will translate to APRA resourcing over the four-year period.

Table 1: funding allocation and resourcing for APRA, 2017–18 through 2020–21

2017–18

2018–19

2019–20

2020–21

Additional budget ($m)

0.4

1.4

1.2

1.2

Additional FTE

2

6

5

5

Source: Australian Prudential Regulation Authority (APRA), Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 1 November 2017, p. 5.

The BEAR is part of the broader package A More Accountable and Competitive Banking System for which Treasury was allocated $1.1 million in the 2017–18 Budget to oversee implementation.[57]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[58]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights (the Joint Committee) reported on the Bill on 28 November 2017. The Joint Committee raised similar issues to those considered in the Scrutiny Committee’s digest, seeking a response from the Treasurer on the human rights compatibility of APRA’s coercive examination and information-gathering powers under the Bill.[59]

The Joint Committee noted that the Statement of Compatibility addresses the engagement and limitation of the right against self-incrimination with reference to the International Covenant on Civil and Political Rights (the Covenant) (article 14(3)(g)).[60] The Joint Committee found it could not reach a conclusion without further advice on a range of matters that would legitimise the proportionality of the limitation under the Bill’s provisions.[61]

The Joint Committee noted the consideration in the Statement of Compatibility of article 17 of the Covenant with respect to the right to privacy and the measure that requires ADIs to furnish information to APRA.[62] However, the Joint Committee identified a lack of acknowledgment about how the Bill engages and limits an individual’s right to privacy under powers introduced by Schedule 2 of the Bill, specifically:

… whether the measure is the least rights-restrictive way of achieving the stated objective of the measure, and of any safeguards in place to protect a person’s informational privacy when providing information pursuant to APRA's examination and information gathering powers.[63]

At the time of writing, the Joint Committee has yet to issue its concluding assessment of the Bill, which will incorporate the ministerial response dated 14 December 2017.[64]

Key provisions

The Bill consists of two schedules.

•       Schedule 1 of the Bill inserts a new Part IIAA into the Banking Act to implement the proposed BEAR 

–      Schedule 1 consists of three parts, Part 1 makes the main amendments to implement the BEAR, Part 2 makes consequential amendments to other Acts and Part 3 contains application and transitional provisions

•       Schedule 2 amends APRA’s regulatory powers by inserting a new Part VIII into the Banking Act, under which APRA will be able to obtain financial records and persons who fail to provide access to records will commit an offence.

Schedule 1 – The BEAR

In summary, the BEAR establishes:

•       a class of directors or executives of ADIs that are defined as ‘accountable persons’ (proposed section 37BA of the Banking Act, at item 1 of Schedule 1 to the Bill)

–      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 (proposed subsection 37BA(1)) and by reference to particular responsibilities listed under proposed subsection 37BA(3) or determined by legislative instrument under proposed subsection 37BA(4)

•       a requirement for all accountable persons to be registered with APRA (proposed subsection 37DA)

•       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 obligations and

•       a civil penalty regime for ADIs that applies if an ADI fails to comply with its obligations.

Who is an accountable person?

The BEAR creates a class of ADI executives designated as ‘accountable persons’ who are subject to particular accountability obligations under the proposed legislation.

An accountable person is defined under proposed section 37BA. The general principle is that a person who has actual or effective senior responsibility for the management or control of the ADI (proposed subparagraph 37BA(1)(b)(i)) or of a significant or substantial part of the ADI (proposed subparagraph 37BA(1)(b)(ii)) is an accountable person.

Without limiting the general principle, proposed subsection 37BA(3) sets out a list of specific responsibilities in an ADI which, if performed by an individual, indicate that that individual is an accountable person. This list includes responsibility for the management of the ADI’s financial resources, its risk management and control systems, its internal audit function, its compliance function and its anti-money laundering function. In addition, under proposed subsection 37BA(4) APRA may also determine, by legislative instrument, additional responsibilities which make someone an accountable person. The Bill also provides that an individual may be an accountable person if they have responsibility for the activities of a branch of a foreign ADI operating in Australia (proposed subsection 37BA(6)). APRA may also exclude specified responsibilities that would otherwise result in an individual being a responsible person (proposed section 37BB) or may exempt an individual from an obligation of the BEAR if complying with that obligation would contravene a foreign law (proposed section 37BC).

If more than one person has the same responsibility in the ADI then those persons have joint accountability (proposed subsection 37CA(2)), rather than individual accountability.

Registration of accountable persons

The BEAR requires that all accountable persons be registered with APRA. Proposed subsection 37DA(1) provides that a person is prohibited from being an accountable person if they are not registered under proposed Subdivision B of Division 6 of Part IIAA.

Proposed section 37H requires that APRA must maintain a register of accountable persons which must contain the person’s name, their date of registration as an accountable person, the date a person ceases to be an accountable person, details of any disqualification and details of any direction given by APRA to the accountable person.

Proposed section 37HA provides that an ADI may apply to APRA to register an accountable person. The application must be in writing and include both a signed declaration that the ADI is satisfied that the person is suitable to be an accountable person and an accountability statement for that person detailing the aspect of the ADI’s functions that the individual is responsible for.

Disqualification of an accountable person

Proposed subsection 37J(1) provides that APRA may disqualify an individual from being or acting as an accountable person if APRA is satisfied that the individual has not satisfied their accountability obligations and APRA is satisfied that the non-compliance is sufficiently serious to justify the disqualification.  APRA may disqualify a person from being or acting as an accountable person for a particular ADI, a class of ADIs or all ADIs, or any subsidiaries of these (proposed subsection 37J(2)).

APRA may vary or revoke a disqualification on its own initiative or following an application by the disqualified person (proposed section 37JA).

Decisions made by APRA to disqualify or vary or revoke a disqualification are subject to reconsideration and review under Part VI of the Banking Act (proposed subsection 37J(8) and proposed subsection 37JA(4)). Under Part VI, a person affected by a reviewable decision can apply to APRA to reconsider the decision (section 51B) or seek a review by the AAT (section 51C). Individuals would also have a right of judicial review by the Federal Court.[65]

What obligations does the Bill impose on ADIs and accountable persons?

The Bill proposes to impose obligations on both ADIs and accountable persons within an ADI. These obligations are imposed under the proposed Division 1 (‘general obligations’), Division 2 (‘accountability obligations’), Division 3 (‘key personnel obligations’), Division 4 (‘deferred remuneration obligations’) and Division 5 (‘notification obligations’).

General obligations

Proposed section 37 requires an ADI to comply with its obligations under proposed divisions 2 to 5. However, the Minister may exempt an ADI or class of ADIs under proposed section 37A. APRA may also exempt an ADI from all or part of an obligation to the extent that it is inconsistent with a foreign law that applies to the ADI (proposed section 37AA).

Proposed section 37B requires an accountable person to comply with obligations under proposed Division 2 except to the extent that the person is an accountable person of an ADI that is exempted under proposed subsection 37(2).

Accountability obligations

Proposed section 37C outlines the accountability obligations of an ADI.  The ADI must take reasonable steps to:

•       conduct its business with honesty and integrity, and with due skill, care and diligence

•       deal with APRA in an open, constructive and cooperative way

•       prevent matters arising that would affect the ADI’s prudential standing or reputation and

•       ensure that each accountable person meets their accountability obligations.

Proposed section 37CA outlines the accountability obligations of an accountable person of an ADI. The accountable person must:

•       act with honesty and integrity, and with due skill, care and diligence

•       deal with APRA in an open, constructive and cooperative way and

•       take reasonable steps to prevent matters from arising that would adversely affect the prudential standing or reputation of the ADI.

Proposed section 37CB provides guidance on what constitutes ‘reasonable steps’, this includes ensuring that appropriate governance, control and risk management strategies, and safeguards and procedures for identifying and addressing problems are in place.

Key personnel obligations

Proposed section 37D sets out the key personnel responsibilities for an ADI. The ADI is required to ensure that an accountable person is registered for each responsibility under proposed subsections 37BA(3) and 37BA(4) and to ensure that all accountable persons in the ADI have been registered and have not been disqualified from being an accountable person.

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.

Proposed subsection 37E(1) sets out the remuneration obligation of an ADI, which are:

•       requiring a proportion of an accountable person’s variable remuneration be deferred for a period (proposed paragraph 37E(1)(a))

•       requiring the ADI to have a remuneration policy in force which provides that if an accountable person fails to comply with their accountability obligations, then the person’s variable remuneration is reduced by an amount that is proportionate to the failure (proposed paragraph 37E(1)(b))

•       to ensure that if an accountable person’s variable remuneration is reduced under the remuneration policy that the amount of the reduction is not paid to the person (proposed paragraph 37E(1)(c)) and

•       to take reasonable steps to ensure that if the variable remuneration is payable to an accountable person of a subsidiary of an ADI, that the subsidiary also complies with the obligations under paragraphs 37E(1) (a), (b) and (c).

Proposed paragraph 37E(2)(a) provides that a reduction in an accountable person’s variable remuneration can occur in any period, not only the period in which the person failed to meet their accountability obligations. Proposed paragraph 37E(2)(b) provides that variable remuneration may be reduced to zero.

Proposed subsection 37EA(1) defines variable remuneration as the accountable person’s remuneration that is conditional on achievement of objectives. Proposed subsection 37EA(3) allows APRA to, by written notice to an ADI, determine that a particular type of remuneration provided by that ADI to one or more accountable persons is, or is not variable remuneration. APRA may also determine by legislative instrument that remuneration of a particular kind is (or is not) variable remuneration (proposed subsection 37EA(4)).

Proposed section 37EB 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.

Proposed section 37EC sets out the minimum deferral period in relation to variable remuneration of an accountable person. The minimum deferral period is four years or a shorter period approved by APRA. An ADI may apply to APRA to approve a shorter period if the ADI is satisfied the person has complied with their accountability obligations (proposed subsection 37EC(3)). APRA may approve such a request if the person is no longer an accountable person because they have died or are suffering serious incapacity, disability or illness or a circumstance determined by APRA in a written notice given to an ADI, or by legislative instrument, exists (proposed subsections 37EC(4) to (6)).

Proposed section 37ED provides that the deferral requirements do not apply to variable remuneration amounts less than $50,000, or an amount determined by the Minister.

Notification obligations

The Bill proposes to apply notification obligations on an ADI under proposed subsection 37F(1). The notification obligations are:

•       providing APRA with an accountability statement for each of its accountable persons

–      an accountability statement is a comprehensive statement of the responsibilities of an accountable individual (proposed section 37FA).

•       providing APRA with an accountability map

–      an accountability map must contain: the names of all accountable persons in an ADI, details of the reporting lines of each accountable person, sufficient information to identify the accountable person for each of the responsibilities set out at section 37D and information determined by APRA by legislative instrument (proposed section 37FB).

•       to notify APRA of the following events under proposed section 37FC:

–      a person ceasing to be an accountable person

–      the dismissal or suspension of an accountable person

–      the reduction of the variable remuneration of an accountable person

–      the ADI becoming aware that the ADI itself or an accountable person of the ADI has breached its accountability obligations.

Civil penalties

Proposed subdivision A of Division 6 of the new Part IIAA introduces civil penalties which can be imposed by the Federal Court of Australia on ADIs that fail to comply with their obligations under the BEAR.

The amount of the penalty is an amount not exceeding:

•       for large ADIs, 1,000,000 penalty units ($210 million)

•       for medium ADIs, 250,000 penalty units ($52.5 million) or

•       for small ADIs, 50,000 penalty units ($10.5 million).[66]

The Minister may, by legislative instrument, determine what constitutes a large, medium or small ADI (proposed subsection 37G(3)). The Federal Court of Australia must have regard to the impact on the viability of the ADI when applying a penalty (proposed subsection 37G(4)).

Miscellaneous provisions

In order to ensure that penalties are effective under the BEAR, proposed section 37KA prohibits an ADI or a related body corporate from indemnifying or insuring the ADI or an accountable person of the ADI from penalties or other consequences under the BEAR.

Proposed section 37KC requires the Minister to initiate a review of the BEAR after three years and prepare a written report to be tabled in the Parliament.

Transitional provisions

Part 3 of Schedule 1 to the Bill contains the proposed application and transitional provisions for the BEAR.

Most parts of Schedule 1 to the Bill are scheduled to commence on 1 July 2018.

Item 15 allows 90 days from commencement of new Part IIAA for accountable persons in place at the commencement to be registered.

ADIs must have remuneration policies that comply with the requirements of proposed Division 4 of Part IIA in place by 1 July 2018. item 16 provides that 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 proposed Division 4 does not apply until 1 July 2020.

Item 17 provides that 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.

Schedule 2 – Examination powers

Schedule 2 of the Bill provides APRA with additional examination powers to investigate breaches of the BEAR and other requirements under the Banking Act.

Items 8 and 9 of Schedule 2 insert new Part VIII into the Banking Act. The new Part contains provisions that compel an individual to cooperate with an investigator and/or appear before the investigator if the investigator reasonably believes or suspects the person has access to information relevant to the investigation (proposed section 61C).

If an examination is conducted, the person being examined may be required to take an oath or make an affirmation and to answer questions (proposed section 61D). Failure to comply with these requirements is an offence punishable by a maximum penalty of 30 penalty units ($6,300) (proposed section 61G). A written record of the examination must be prepared and provided to the examinee. The investigator may place conditions on the use of the record, which the examinee must comply with. A penalty of up to six months imprisonment applies if the person fails to comply with these conditions (proposed section 61F).

The investigator is empowered to request books, accounts or documents relevant to the investigation (proposed subsection 61A(1)). A penalty equal to 30 penalty units ($6,300) applies if an individual refuses to provide a book, account or document on request (proposed subsection 61A(2)), and a maximum of two years imprisonment applies if a person conceals or destroys a document relevant to an investigation (proposed section 61B).

Key issues

Scope of the BEAR

The proposed BEAR is prudentially focused and only applies to the conduct of ADIs, and not other prudentially regulated entities (such as insurance companies) or parts of the financial industry that are not regulated by APRA. This is reflected in the accountability obligations which require the ADI and individuals to take reasonable steps to protect the prudential standing and prudential reputation of the ADI. Treasury confirmed in Senate Estimate hearings in May 2017 that the BEAR is intended to be prudentially focused:

The government was very clear in having this measure focus on the prudential side and not on the market conduct side. You are right in saying that the measure is targeted at prudential conduct.[67]

The BEAR would not apply to issues of market misconduct which do not raise prudential concerns, but that could nevertheless have detrimental effects on customers. Market conduct is broadly within the regulatory remit of Australian Securities and Investments Commission (ASIC), rather than APRA. The types of misconduct that would result in APRA being able to undertake action under the BEAR are not clear-cut. As the Chairman of APRA noted in May 2017, these issues would need to be addressed on a case-by-case basis and in cooperation with ASIC:

APRA's mandate is prudential, and so it must come back to prudential—but understanding that prudential captures things like governance, risk management, internal controls, remuneration incentives et cetera. So, ultimately, for any particular episode, it will depend on what was considered to be the underlying cause or failings that led to that: if it were failings in governance, if it were failings in risk management, if it were failings in internal control or if it were failings from poor remuneration arrangements then they all have prudential lenses to them. So I think there is plenty of capacity there to look at those issues. When there are misconduct issues, quite often there are issues that are of interest to APRA and issues that are of interest to ASIC. That is not unusual. It is quite common. Usually for those instances we will work together, and we will see for the particular circumstances who has the best powers and investigative abilities et cetera to respond to those things. So there may be instances where the circumstances mean it is better dealt with through the ASIC enforcement provisions and there may be circumstances where the decision is that the issues are better dealt with through APRA or some combination of the two.[68]

A number of submissions made to the Economics Committee inquiry into the Bill argued that the BEAR should be expanded to cover non-ADIs and market conduct issues that affect consumers more broadly. It was argued that ASIC should be given similar regulatory powers to APRA. For example, the Consumer Action Law Centre and Choice argued that:

…we believe improvements could be made to the Bill to ensure that the accountability regime better links executive remuneration and any penalties to widespread consumer harm. It is imperative that ASIC is given equivalent powers to ensure it can effectively regulate non-ADI entities.[69]

In its report, the Economics Committee agreed that in time the BEAR could be expanded both beyond ADIs and to cover market misconduct more broadly, stating that:

The committee believes that, in time, heightened accountability obligations should be extended to non-ADI firms in the financial sector and also to matters that affect consumer outcomes (as has been done in the United Kingdom).[70]

In this regard, it is worth noting that the UK SMR, which has a broader consumer focus, is jointly administered by the Financial Conduct Authority (broadly ASIC’s equivalent) and the Prudential Regulation Authority (broadly APRA’s equivalent).

Clarity of terminology and accountabilities

A number of stakeholders raised concerns that there is insufficient clarity around the legal definition of various terms included in the Bill such as ‘prudential standing’ or ‘prudential reputation’, and that a number of the obligations are highly subjective, such as dealing with APRA ‘openly’ and ‘cooperatively’.[71] This raises concerns that the obligations that the Bill places on ADIs and accountable persons are unclear or open to legal interpretation.[72]

In the Economics Committee’s view no further clarification of the terminology in the Bill is warranted. However, it stated that APRA should consider providing guidance clarifying the key terms with which stakeholders raise concerns.[73]

Joint accountability

A number of stakeholders raised concerns with the Economics Committee that joint responsibility under proposed subsection 37CA(2) could make a person responsible for the actions of another accountable person, which may be unreasonable given the specific circumstances of the impropriety.  For example, the Australian Bankers’ Association (ABA):

… believes that each accountable person must be individually responsible and accountable for their own conduct, and execution of their own responsibilities (as set out in their accountability statement). This approach is consistent with the stated intention of the BEAR to ensure that senior bank executives are held personally accountable for a failure to meet their accountability obligations. An individual should not be made responsible for the performance or conduct of another accountable person, especially in light of the accountability obligations of accountable persons (such as to act with honesty and integrity and with due skill, care and diligence—section 37CA(1)(a)).[74]

The Committee indicated that it shared such concerns and noted that the UK scheme does not have joint liability. As mentioned above, the Committee’s final report urged the Government to reconsider whether joint responsibility is appropriate but did not explicitly recommend changes.[75]

Remuneration

Stakeholders have varying views on the remuneration requirements imposed by the Bill.

Some stakeholders view the proposition that legislation would apply to remuneration structures in the private sector as an unwelcome market intervention, arguing (for example):

… the introduction of the Bill will distort remuneration structures in the entire financial services sector and have unforeseen consequences in overlapping sectors… We see this as an intrusion on the role of boards.[76]

One of the effects predicted in the submissions is that ‘ADIs will likely face pressure from executives in “accountable person” roles to increase base salary to compensate for deferral of variable remuneration’.[77]

The ABA did not contest the Government’s prerogative to intervene in the calculation and payment of variable remuneration, but did call for greater clarity about the methodology for calculating the value of that component to ‘ensure consistency between organisations, regardless of whether they use a fair or face value calculation’.[78] APRA noted in its submission that it ‘may need to provide additional guidance on how [fair value to value variable remuneration] calculations should be undertaken with a view to ensuring consistent application of the new regime’.[79]

Disqualification and removal powers

In a response to Treasury’s July 2017 consultation paper on the BEAR, Andrew Eastwood and James Emmerig of Herbert Smith Freehills discussed the potential constitutional issue of statutory bodies applying penalties, such as APRA disqualifying individuals under the BEAR. They characterise such powers as:

[subsisting] in the grey area of ‘quasi-penalties’ already existing in the regulatory landscape, which have been subject to constitutional challenge in the past.[80]

They acknowledge that to date that the High Court has upheld the disqualification powers of various statutory agencies (such as APRA and ASIC). They note:

Since the High Court’s finding in Rich v ASIC that the court-ordered disqualification of a director has a punitive purpose, various challenges have been brought against analogous powers conferred on regulators including APRA and ASIC, the Takeovers Panel and other administrative bodies. To date, despite differing views in lower courts, those powers have ultimately been upheld on the basis that they are not sufficiently ‘judicial’ to infringe Ch III [of the Constitution].

More broadly, the BEAR proposals invite a reflection on the ongoing expansion of, and increased reliance upon, administrative enforcement powers in Australian financial services regulation. Indeed, the BEAR proposals are part of a broader suite of powers expected to be introduced in the near future, with ASIC publicly seeking its own version of the powers following recommendations in the 2016 report of the Coleman Inquiry.[81]

Implementation timeframe

APRA noted in its submission that:

Following passage of the legislation, both APRA and the banking industry will have a great deal of work to do to implement the accountability regime by the scheduled commencement date of 1 July 2018. APRA expects that this timeframe will be challenging; for this reason, the legislation provides some additional transition arrangements in some areas.[82]

Industry groups indicated an expectation that clear signals from APRA would be antecedent to ADIs’ own arrangements being finalised, and that a minimum 12-month timeframe should apply from when the legislation passes through Parliament.[83] Others echoed the Financial Systems Inquiry recommendation on allowing adequate timeframes for industry to implement complex regulatory change:[84]

… we are of the view that ADIs will need time to undertake changes to policies, contracts and systems … It is not acceptable that governments continue to reduce implementation timeframes to complex legislation.[85]

As discussed, the Economics Committee was supportive of the need for additional time to implement the regime and recommended that the Government change the implementation date of the BEAR from 1 July 2018 to 12 months after the Bill is passed.[86]

Some stakeholders also called for a phased approach to implementation, particularly for smaller ADIs, and noted that the equivalent UK regime was implemented over a timeframe of 27 months.[87]

Labor has indicated that it will seek amendments to the Bill to further reduce the implementation burden for small and medium ADIs by amending the commencement date for small and medium ADIs to 1 July 2019.[88]

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[1].              An authorised deposit-taking institution (ADI) is a corporation authorised by the Australian Prudential Regulation Authority (APRA) under the Banking Act to take deposits, make advances of money or undertake other financial activities specified in regulations under the Act. They include banks, credit unions, building societies, branches of foreign banks, subsidiaries of foreign banks and payments system operators.

[2].              See, for example, House of Representatives Standing Committee on Economics, Review of the four major banks, House of Representatives, Canberra.

[3].              G Brandis (Attorney-General) and S Morrison (Treasurer), Royal Commission into alleged misconduct in Australia's banking, superannuation and financial services industry established, media release, 18 December 2017.

[4].              House of Representatives Standing Committee on Economics, Review of the Four Major Banks (First Report), House of Representatives, Canberra, 24 November 2016, pp. 13–14.

[5].              House of Representatives Standing Committee on Economics, Review of the Four Major Banks (Second Report), House of Representatives, Canberra, 21 April 2017, pp. 6–8.

[6].              Ibid., pp. 34–6.

[7].              Australian Government, Government response: House Economics Committee’s review (Coleman Report) of the four major banks, 9 May 2017; S Morrison (Treasurer), Building an accountable and competitive banking system, media release, 9 May 2017, p. 2; Australian Government, Budget measures: budget paper no. 2: 2017–18, 9 May 2017, p. 160.

[8].              S Morrison, ‘Second reading speech: Appropriation Bill (No. 1) 2017–2018’, House of Representatives, Debates, 9 May 2017, p. 4063.

[9].              S Morrison, ‘Second reading speech: Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017’, House of Representatives, Debates, 19 October 2017, p. 11270.

[10].              Australian Government, Banking executive accountability regime, Consultation paper, Treasury, July 2017, p. 3.

[11].              Australian Prudential Regulation Authority (APRA), Prudential Practice Guide, APG520 – Fit and Proper, APRA website, July 2008, p. 4.

[12].              APRA, Prudential Practice Guide, PPG 511-Remuneration, APRA website, 30 November 2009, p. 8.

[13].              Ibid., pp. 8–9.

[14].              Explanatory Memorandum, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017, pp. 7 and 58–9.

[15].              Ibid., p. 57.

[16].              Ibid., p. 59.

[17].              Ibid., p. 59.

[18].              Ibid.

[19].              Australian Government, Banking executive accountability regime consultation paper, op. cit., pp. 16–19.

[20].              Financial Conduct Authority (FCA) (United Kingdom), ‘Senior managers and certification regime’, FCA website. The key part of this UK regime is the Senior Managers Regime, one of the ‘three pillars’ of the regulatory framework; although a second component, the Certification Regime, shares some characteristics proposed in the BEAR requirements to register accountable persons: see FCA, ‘Senior managers and certification regime: banking’, FCA website.

[21].              Ashurst, Extension of the senior managers’ regime: a puzzle for all in 2017, Financial regulation, January 2017, p. 3.

[22].              A Bailey, ‘The FCA is making senior management for the culture in their firms’, The Guardian, 28 September 2016.

[23].              Deloitte, Senior managers regime: Individual accountability and reasonable steps, April 2016, p. 3.

[24].              Ibid.

[25].              Ibid., p. 4.

[26].              Ibid., p. 5.

[27].              FCA, Individual accountability: extending the Senior Managers & Certification Regime to all FCA firms, Consultation paper, CP17/25, July 2017, p. 4.

[28].              FCA, ‘FCA Handbook: COCON 2.1 individual conduct rules’, FCA website.

[29].              M Carney (Governor, Bank of England) Turning back the tide, Speech to the FICC Market Standard Board, 29 November 2017, p. 7.

[30].              S Isted (Partner, Price Waterhouse Coopers), ‘Learning the lessons from the Senior Managers Regime’, pwc website, 6 September 2017.

[31].              J Leung (Executive Director, Securities and Futures Commission, Hong Kong), Manager-in-Charge initiative: fostering accountability and a compliance culture, speech to the Alternative Investment Management Association Asia–Pacific Annual Forum, 19 January 2017, p. 2; Securities and Futures Commission (SFC) (Hong Kong), SFC fully implements manager-in-charge regime, media release, 17 October 2017.

[32].              Hong Kong Government, Circular to Licensed corporations regarding measures for augmenting the accountability of senior management, SFC, 16 December 2016.

[33].              J Leung, Manager-in-Charge initiative: fostering accountability and a compliance culture, op. cit., p. 3.

[34].              See SFC, Securities & future commission of Hong Kong: enforcement news, SFC website; see also SFC, Enforcement reporter, May 2017, pp. 4–6.

[35].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], The Senate, Canberra, 24 November 2017, p. 29.

[36].              Ibid., pp. 28–9.

[37].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 13, 2017, The Senate, 15 November 2017, pp. 50–5.

[38].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 15, 2017, The Senate, 6 December 2017, pp. 85–99.

[39].              Ibid., pp. 85–90.

[40].              Ibid., pp. 90–5.

[41].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], op. cit., p. 31.

[42].              Ibid.

[43].              Ibid., p. 44.

[44].              Ibid., p. 45.

[45].              Ibid., p. 46.

[46].              Australian Bureau of Statistics (ABS), Average Weekly Earnings, Australia, May 2017, cat. no. 6302.0, ABS, Canberra, 2017.

[47].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], op. cit., p. 47.

[48].              P Whish-Wilson, Proposed Amendment to the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017, [sheet 8342], 15 December 2017.

[49].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], op. cit., p. 47.

[50].              Ibid., p. 49.

[51].              Ibid., pp. 24–8.

[52].              Customer Owned Banking Association (COBA), Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], 1 November 2017, p. 2.

[53].              APRA, Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], 1 November 2017, p. 6.

[54].              House of Representatives Standing Committee on Economics, Review of the Four Major Banks (Third Report), Commonwealth of Australia, Canberra, 7 December 2017, p. 29.

[55].              Explanatory Memorandum, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017, p. 7; APRA, Submission op. cit., p. 5.

[56].              Explanatory Memorandum, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017, p. 7.

[57].              Ibid.

[58].              The Statement of Compatibility with Human Rights can be found at pages 77–81 of the Explanatory Memorandum to the Bill.

[59].              Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 12, 28 November 2017, p. 53.

[60].              Ibid., pp. 53–4.

[61].              Ibid., p. 55.

[62].              Ibid., p. 56, note 5; see also Explanatory Memorandum, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017, p. 80.

[63].              Ibid., p. 56.

[64].              Parliamentary Joint Committee on Human Rights, ‘Correspondence register’, Table 2: Recent correspondence received, Parliament of Australia website.

[65].              Explanatory Memorandum, op. cit., p. 59.

[66].              Section 4AA of the Crimes Act 1914 (Cth) provides that a penalty unit is equal to $210.

[67].              J Lonsdale (Deputy Secretary, Markets Group, Department of the Treasury), Evidence to Senate Economics Legislation Committee, Estimates hearings, 30 May 2017, p. 119.

[68].              W Byres (Chairman, APRA), Evidence to the Senate Economics Legislation Committee, Estimates hearings, 30 May 2017, p. 168.

[69].              Consumer Action Law Centre and Choice, Submission to the Senate Standing Committee on Economics, Inquiry into Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 1 November 2017, p. 1.

[70].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], op. cit., p. 29.

[71].              Herbert Smith Freehills, Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 1 November 2017, p. 2; Australian Institute of Company Directors (AICD), Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 2 November 2017, p. 1.

[72].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], op. cit., pp. 13–14.

[73].              Ibid., p. 28

[74].              Australian Bankers’ Association (ABA), Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 1 November 2017, p. 2.

[75].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], op. cit., p. 29.

[76].              Australian Shareholders’ Association (ASA), Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 30 October 2017, pp. 1–2. See also AICD, Submission to Senate Economics Legislation Committee, op. cit.

[77].              Herbert Smith Freehills, Submission to Senate Economics Legislation Committee, op. cit., p. 11.

[78].              Australian Bankers’ Association, Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 1 November 2017, p. 3.

[79].              Australian Prudential Regulation Authority (APRA), Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], 1 November 2017, p. 5.

[80].              A Eastwood and J Emmerig, ‘The BEAR necessities: what jurisdictional considerations will Australia's version of the UK’s “Senior Managers and Certification Regime” need to accommodate?’, Journal of Banking and Finance Law and Practice, 28 (2017), pp. 221–35, 222.

[81].              Ibid., p. 222.

[82].              Australian Prudential Regulation Authority (APRA), Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], 1 November 2017, p. 6.

[83].              For example, see ABA, Submission to Senate Economics Legislation Committee, op. cit., p. 6; Westpac Group, Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], 1 November 2017, p. 2; Macquarie Group Limited, Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [Provisions], 2 November 2017, p. 4; AICD, Submission to Senate Economics Legislation Committee, op. cit., p. 2.

[84].              Australian Government, Financial system inquiry: final report, Treasury, Canberra, 7 December 2014, recommendation 31; described as follows:
‘Except in exceptional circumstances, Government and regulators should give industry participants at least six months to begin implementing regulatory changes once they are finalised. Additional transitional periods of 12–24 months will also generally be appropriate. Grouping commencements at fixed dates during the year—for example, 1 July and 1 January—would help industry participants to accommodate overlaps between related changes, rather than having to make multiple system changes’: p. 257.

[85].              ASA, Submission to Senate Economics Legislation Committee, op. cit., p. 3.

[86].                            Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], The Senate, Canberra, 24 November 2017, p. 29.

[87].              COBA, Submission to Senate Economics Legislation Committee, op. cit., pp. 7 and 9. See also Bendigo and Adelaide Bank, Submission to Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], 1 November 2017, p. 2.

[88].              Senate Standing Committee on Economics, Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 [provisions], op. cit., p. 44.