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Bear Information sheet and Culture Reviews

Last week the Australian Prudential Regulation Authority (APRA) published an information paper that is intended to help ADIs meet their obligations under the Banking Executive Accountability Regime (BEAR).

“Many problems that have arisen in the financial system over recent years have had, at their heart, organisational complexity and diffused responsibility. By effectively implementing the BEAR, ADIs will genuinely enhance their governance and risk management through much clearer understanding and agreement on individual accountabilities,” APRA Chair Wayne Byres said.

The BEAR regime has been introduced to help improve the conduct and accountability in the for banks and ADIs.

While banks have already been captured by this regime since July this year, other ADIS will be impacted from the 1 July 2019.

The regulator said that paper will clarify their expectations around:

  • identifying and registering accountable persons;

  • creating and submitting an accountability statement for each accountable person, and an accountability map for the ADI;

  • establishing a remuneration policy requiring that a portion of accountable persons’ variable remuneration be deferred for a minimum of four years, and reduced commensurate with any failure to meet their obligations; and

  • notifying APRA of any accountability-related changes or breaches of accountability obligations.

More than a vague commitment

In Pat Brennan’s speech this week he suggested that ADI’s need to take a conscientious approach.

“When planning for implementing BEAR we encourage you to not think of it as a one-off exercise – it is the start on a new, ongoing regime,” Brennan said.

Culture Reviews

At the last week’s GRC2018 Keynote Event, that was part of the GRC Event Series, Sean Carmody from APRA told attendees that while conduct is not directly in their remit, they are interested on conduct’s impact on meeting regulatory obligations.

“If there are sufficiently systemic, rather than very isolated incidents, and with the Royal Commission on we can say that there real systemic issues in the industry, then that points to real failings of risk management and good governance and that becomes a prudential threat,” He explained.

Carmody explained that what they have seen is the gap between the risk framework on paper and the what is happening practice.

The regulator has also been focusing on doing culture reviews. This something that the regulator had announced would be one of their focusses last year.

“There is no one single answer to what the right culture or the right way to get there.”

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