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BEAR Individual Accountability Regimes Regulations SMCR

BEAR: How StarCompliance Can Help With Australia’s Answer To The SMCR

As accountability regulations become more prescriptive, being able to evidence your compliance will only become more important. Dashboard analytics—and the data visibility they provide—can help

Regulations calling for more accountability from financial firms and their senior managers are on the rise globally. Perhaps most notably, in the UK it’s the Senior Managers & Certification Regime, or SMCR. In Australia, it’s the Banking Executive Accountability Regime, or BEAR. The SMCR was part of the UK’s answer to what was perceived to be a broken banking culture. The same kind of thinking drove the implementation of BEAR. Today we’ll take a look at what the regulation requires and how StarCompliance can help your firm meet those requirements.

BEAR is part of Australia’s Banking Act 1959 which, as the name suggests, dates back to 1959. Banking Act 1959 has been added to significantly since, and BEAR was officially added to the law in February 2018. BEAR is administered by the Australian Prudential Regulation Authority, or APRA. Accountability for large authorized deposit-taking institutions, or ADIs, began July 2018, and for small- and medium-sized ADIs in July 2019.

Per the APRA information paper outlining its implementation, BEAR establishes “clear and heightened expectations of accountability for authorized deposit-taking institutions, their directors, and senior executives, and set[s] out clear consequences in the event of a material failure to meet those expectations.” The paper also stresses the APRA expects ADIs to “take ownership” of BEAR compliance through “genuine reflection and consideration of mechanisms to improve governance and accountability.”

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

  • A clear and common understanding within an institution of where accountability lies within the senior executive team for any particular part or aspect of the business.
  • A clear, transparent, and common understanding within an institution of how a given individual meets his or her obligations as the accountable individual.
  • Direct and proportional consequences of failure to meet those obligations, whether by inappropriate action or failure to act, within the area of accountability.

The accountability regime establishes accountability obligations for ADIs, requiring each ADI to take reasonable steps to:

  • Conduct its business with honesty and integrity, and with due skill, care, and diligence.
  • Deal with the APRA in an open, constructive, and cooperative way.
  • Prevent matters from arising that would adversely affect the ADI’s prudential standing or prudential reputation.
  • Ensure that each of its accountable persons meets his or her accountability obligations.
  • Ensure that each of its subsidiaries that is not an ADI complies with the above as if the subsidiary were an ADI.

The accountability regime creates a class of accountable persons, with requirements for accountability maps and accountability statements:

  • All directors of the board of an ADI are accountable persons, as are individuals with actual or effective senior executive responsibility for control of a significant part of the operations of the ADI or ADI group. Individuals with senior executive responsibility for one of the responsibilities specified in the legislation are also accountable persons.
  • Specific positions include those in control of the ADI’s: financial resources; risk control and risk management operations; information management; internal audit functions; compliance function; human resources; and anti-money laundering function.
  • An individual will be an accountable person of a foreign ADI if he or she has senior executive responsibility for the conduct of all activities of an Australian branch.
  • Such individuals must register with the APRA prior to commencing as an accountable person, with a grace period of 28 days for temporary or unforeseen vacancies.
  • ADIs must provide APRA with an accountability statement for each accountable person detailing the parts of the ADI’s operations for which he or she is accountable.
  • ADIs must provide an accountability map showing collectively how the responsibilities of accountable persons come together to cover all parts of the operations of the ADI.

ADIs must provide APRA with an updated accountability statement or map within 14 days after any change. ADIs must also notify APRA within 14 days after any of the following events:

  • An individual ceasing to be an accountable person.
  • An ADI becoming aware of a breach of accountability obligations by the ADI or an accountable person.
  • A reduction in variable remuneration, or the dismissal or suspension of an accountable person, because he or she failed to comply with accountability obligations.

Finally, ADIs are required to defer a prescribed minimum proportion of an accountable person’s variable remuneration for a minimum of four years. A remuneration policy must require a reduction in an accountable person’s variable remuneration proportionate to any failure to comply with accountability obligations. In serious cases of non-compliance, APRA may disqualify an individual from being an accountable person. And the APRA may apply to the Federal Court of Australia to seek a pecuniary penalty if an ADI breaches its accountability regime obligations.

Those are the basics of BEAR. Like with the UK’s SMCR, and other accountability regulations either already in place around the globe or up and coming, being able to evidence your firm’s compliance will only become more important, particularly as these kinds of regulations become more prescriptive. Dashboard analytics can be of enormous help in this effort. Here’s how.

Dashboards, like Star’s own Compliance Dashboards, are reporting tools that give compliance officers and frontline supervisors actionable intel in near-real time—automatically surfacing data they might otherwise see only when it’s too late to take effective action on, and presented in an intuitive, interactive format that’s readily accessible. Compliance Dashboards reduce departmental workload, create organizational efficiencies, and reduce firm risk. They also make it easy to evidence your compliance to regulators. When the FCA or APRA come calling, and are looking for proof you’ve collected the proper data and an explanation of how you got it, you’ll be able to simply demo the dashboards. It will be there, ready for all to see.

Per the APRA, BEAR is a “dynamic regime that will continue to evolve,” with elements that are “expected to be embedded as part of an ADI’s internal accountability framework.” As this evolution continues, the “APRA will review and challenge how an ADI is refining its frameworks and practices in order to effectively establish clear and strong accountability.” Data visibility and regulatory accountability go hand-in-hand—no matter where in the world you operate or what regulator you answer to—and dashboards offer unparalleled data visibility.