Beyond the BEAR necessities

The Australian Prudential Regulation Authority (APRA) today released Chairman Wayne Byres’ speech 'Beyond the BEAR Necessities' at the UNSW Centre for Law Markets and Regulation Seminar in Sydney.

In his speech, Mr Byres discusses accountability in the financial sector and the implementation of the new Banking Executive Accountability Regime (BEAR). Mr Byres’ comments include:

• the BEAR provides an important new framework for promoting stronger accountability in the banking sector, but more than the BEAR alone is needed. Financial institutions need to think beyond the necessities of BEAR if they wish to truly demonstrate accountability.
• the financial sector provides products which are, in many cases, not optional to consume, difficult to understand, and of great importance to an individual’s overall financial well-being, now and into the future. That combination of compulsion, opacity and materiality generates, as a quid pro quo, a heightened expectation that financial institutions will exhibit high standards of behaviour in the way they operate.
• APRA … has an interest in failings in governance, culture and accountability that indicate a lax attitude to risk-taking, which might ultimately impact the soundness of the financial institution itself (and thereby jeopardise the interests of depositors, policyholders and superannuation fund members).
• In many ADIs, there is often collective responsibility for various aspects of its business: for any given process or product, there are often hand-offs of responsibility (including, at times, to external partners and suppliers). But this creates the risk of collective responsibility leading to no individual accountability. Clarity of accountability – the foundation of the BEAR – goes to the heart of a strong risk culture.
• Organisational complexity and diffused responsibility have been at the heart of many of the issues that have damaged the standing of the banking industry in recent years. ... To the extent that BEAR provides a catalyst to untangle that complexity and provide clear accountability for putting things right, it can only be a good thing.

The full speech is available on the website at: https://www.apra.gov.au/Speeches/Pages/Beyond-BEAR-Necessities-2May18.aspx