APRA and ASIC start joint administration of new FAR

The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have commenced joint administration of the new Financial Accountability Regime (FAR) by publishing an information package to support the financial services industry in implementing the FAR.

The FAR, which aims to improve the risk and governance cultures across financial institutions, will impose a strengthened responsibility and accountability framework for APRA-regulated entities in the banking, insurance and superannuation industries and their directors as well as their most senior executives.

It also goes back to one of the recommendations made by the Financial Services Royal Commission that provisioned modelled on the Banking Executive Accountability Regime (BEAR) to be extended to all APRA-regulated entities.

It will replace the BEAR, which came into effect on 1 July 2018 and was solely administered by APRA. In addition to authorised deposit-taking institutions (ADIs), the FAR will apply to insurance companies, superannuation trustees and licensed non-operating holding companies (NOHCs).

Additionally, the FAR will introduce conduct-focused prescribed responsibilities, and will be jointly administered by APRA and ASIC.

APRA Deputy Chair Margaret Cole said: “Just as the BEAR has helped to sharpen risk culture and governance in the banking sector, we expect the FAR to have a similar positive impact in improving standards of accountability across insurance and superannuation. We are working closely with ASIC to ensure a smooth transition from the BEAR to the FAR, and we encourage industry to engage with both regulators in the lead up to the FAR commencing.”

ASIC Deputy Chair Sarah Court welcomed the extension of the regime to provide accountability in relation to conduct failures.

“We believe the regime will increase transparency and accountability in financial firms and help embed a culture of accountability for misconduct at an individual level – accountable individuals will need to understand and closely engage with their obligations under the FAR,” Court said.

The FAR will come into force for the banking industry on 15 March 2024 and for the superannuation and insurance industries on 15 March 2025.