Bank CIOs caught up in govt’s new accountability regime

Bank IT chiefs that report directly to the board would be registered with APRA under the government’s proposals

Senior chief information officers at Australian banks could be caught up in a new “accountability regime” being pushed by the government.

Treasurer Scott Morrison announced in May that the government would seek to introduce a ‘Banking Executive Accountability Regime’ (BEAR).

Executive and oversight functions would be covered by proposed the regime, including chief information officers that report on the IT function directly to boards.

As an “accountable person”, such CIOs would need to be registered with Australian Prudential Regulation Authority (APRA) under proposals outlined in a consultation paper released today by the Treasury.

“This mechanism will operate by requiring ADIs [authorised deposit-taking institutions], prior to appointing an individual as an accountable person, to advise APRA of the potential appointment and provide APRA with information regarding the candidate’s suitability,” the consultation paper states.

“Upon notification, APRA would consult its register of accountable persons and advise the ADI if the candidate has previously been removed or disqualified by APRA, or if APRA is aware of any other issues that that could affect the candidate’s suitability for the role.”

Banks would not be able to consult the register themselves.

APRA will have enhanced powers to remove and disqualify senior executives and directors under proposals being considered by the government.

The organisation already has the power to direct a bank to remove a director or senior manager if it is satisfied that the person is disqualified from acting in that position, or does not meet the fit and proper criteria set out in the prudential standards.

APRA can also apply for a Federal Court order to disqualify a person from being a senior manager, director or auditor of a regulated business.

One potential boost to APRA’s powers would be allowing it to disqualify a person without applying to the Federal Court, the consultation paper states.

Executive remuneration is another area that government is considering changes. Morrison announced in May that under BEAR, a minimum of 40 per cent of an ADI executive’s variable remuneration would be deferred for a minimum period of four years. In the case of some executives such as CEOs it would affect 60 per cent of their variable remuneration.

“The remuneration elements of the BEAR are specifically intended to enhance accountability for executive accountable persons by ensuring there are financial consequences for conduct that does not meet the new expectations of the BEAR,” the consultation paper states.

“The BEAR is intended to build on rather than replace APRA’s existing prudential standards on remuneration. These prudential standards will continue to apply more widely than to executive accountable persons and APRA is currently undertaking further work in this area.”

The consultation paper is available online.

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