29 September 2017
The banking industry today reaffirmed its support for improving banking executive accountability and highlighted much-needed changes to the draft legislation to ensure the regime works.
“Banks want to strengthen senior executive accountability to give customers more confidence in banks,” Australian Bankers’ Association Chief Executive Anna Bligh said.
“There are major flaws in the way the legislation is drafted, in particular a lack of clarity in critical areas and contradictions with the Explanatory Memorandum,” she said.
“It is unclear which parts of banks and how many of their employees will be subject to the regime.
“The Explanatory Memorandum says one thing, while the draft legislation says the polar opposite. This needs urgent clarification,” Ms Bligh said.
“The banking industry is deeply concerned about the uncertainty and the rushed consultation. The regime simply won’t work if issues are not sorted out now,” she said.
According to the legislation, BEAR would not only apply to banks but to all their subsidiaries as well. Large banks have hundreds of subsidiaries therefore the regime would capture a large number of mid-level and junior executives.
“If banks’ insurance and wealth management businesses are also caught up in the regime it will affect banks’ ability to compete,” Ms Bligh said.
“The draft legislation proposes that APRA can disqualify a person, effectively destroying their career, and doesn’t allow the person to have that life-changing decision reviewed to make sure the law was applied consistently,” she said.
“Protecting an individual’s rights and ensuring procedural fairness is essential if BEAR itself is seen to have integrity and consistency with other laws in Australia.
“To achieve this the ABA strongly recommends that the merits of any disqualification decision by APRA must be able to be reviewed, and that APRA has to apply to the Federal Court to disqualify an individual,” Ms Bligh said.
What constitutes a breach is also unclear in the legislation, with no definition provided of behaviour that affects ‘prudential standing’ or ‘reputation’.
“Neither of these terms are defined, nor do they have an equivalent in any other law,” Ms Bligh said.
“With so much important detail still to be worked out by the Federal Government and regulators, the banking industry is seeking an additional six months to implement BEAR (1 January 2019), or one year from the finalisation of all relevant APRA rules,” she said.
The ABA’s submission to Treasury is attached.
Contact: Stephanie Arena 0477 470 677
“Australian banks are certainly better equipped now than they were in the GFC. They’ve got 2 to 2.5 times the capital reserves put aside for a rainy day than they had in the GFC”
“The Australian Banking Association (ABA) welcomes the agreement reached today on the proposed safeguard mechanism reforms, given it paves the way for the passing of a critical piece of legislation for Australia.
“This is about engaging with the entire banking ecosystem in order to ensure the accessibility of the sector’s services are best serving our diverse community now, and into the future.”