Banks want executive accountability extended to insurers, super funds


September 25, 2017 11:36:30

A new fight is emerging between the nation’s major banks and the Federal Government, with the Australian Bankers Association (ABA) protesting at a one-week consultation timeframe for the new Bank Executive Accountability Regime.

Key points:

  • Up to 40pc of bank executive pay will be at risk if duties breached
  • Draft legislation released on Friday with a one-week consultation period
  • Treasurer Scott Morrison says complaining about lack of consultation “one of the oldest tricks in the book”

The so-called BEAR will ensure that up to 40 per cent of senior bank executives’ remuneration is deferred and can be lost if they fail in their corporate governance duties.

Senior bank executives and directors will also have to be registered with the banking regulator, APRA, and will risk disqualification if they breach their duties.

Big banks will also face penalties of up to $210 million if their executives breach their duties.

Draft legislation for the BEAR was released on Friday, with submissions from interested parties due this Friday, September 29.

The limited consultation period has infuriated the main banking lobby group, which said it is “shocked” to have only a week to read through and comment on 34 pages of draft legislation and a 33-page explanatory memorandum.

“This is not good public policy making,” the Australian Bankers Association’s chief executive Anna Bligh told RN Breakfast.

“Banks have accepted that this regime will be coming into place, they are very keen to work cooperatively with the Government to get that regime right, and there are still some outstanding questions about it.

“I can’t think of another piece of legislation that’s had a seven-day turnaround.”

However, Treasurer Scott Morrison said the banks had plenty of advanced warning about the content of the new laws.

“I first raised this with bank chairs back in February of this year,” he said.

“We had the consultation on the specific proposals for the legislation back in July, it was flagged in the budget.

“So this is one of the oldest tricks in the book, I know it’s a quick turnaround, but I’m not mucking around.”

Mr Morrison told RN Breakfast that the banks are trying to stall for time in the hope of killing the new regulations.

“I know the bank’s don’t want a lot of these things to be in there, but I’m not about to give them three months to make the case why they shouldn’t be in there, they’re going in,” he said.

Banks singled out in new laws

One of the changes the ABA is keen to see to the law is the inclusion of other financial companies.

“It’s currently proposed only to apply to banks, even though APRA — the regulatory body charged with administering the regime — has extensive oversight powers over a much broader financial sector,” Ms Bligh said.

READ ---  Is 'The Dark Tower' Any Good? Depends How Much You've Read

“Banks recruit not only from other banks, they recruit from the insurance sector, they recruit from the superannuation sector — employment is very mobile across the entire finance sector.

“It seems to banks to make a lot of sense, to make sure that the regime actually works in the way the Government wants it to, that it should apply to executives across the whole range of finance.”

Mr Morrison responded that the BEAR is specifically to designed to address risks around so-called authorised deposit-taking institutions (ADIs), which had to be held to a higher standard because they are responsible for customer deposits.

However, Ms Bligh said other financial institutions were likewise responsible for large amounts of Australians’ savings.

“I think Australians want to know that there is accountability in the executive teams not only of banks, who look after their money, but of superannuation that’s looking after their long term retirement, within their insurance companies,” she argued.

“These are substantial financial investments for Australians and I don’t see any strong public policy reasons for the regime to exist in only one part of the finance sector.”