Banks will have to register the details of their chief information officers and chief technology officers under the government’s proposed accountability regime for banks.
Treasurer Scott Morrison today introduced a bill that will implement the new Banking Executive Accountability Regime (BEAR), which is intended to combat misconduct in the sector.
The government says new regime will represent the biggest overhaul of the Australian Prudential Regulation Authority’s powers since APRA’s formation in 1998.
The government staged a public consultation on the proposed BEAR rules earlier this year.
The legislation imposes a “heightened accountability regime” on “people with significant influence over conduct and behaviour” in an authorised deposit-taking institution (ADI) such as a bank.
Under the BEAR, an “accountable person” is a member of a bank’s board with oversight over the organisation or a “senior executive with responsibility for management or control of significant or substantial parts or aspects of the ADI group”.
The proposed regime includes an individual or individuals who hold “senior executive responsibility for information management, including information technology systems”.
A bank must “conduct its business with honesty and integrity, and with due skill, care and diligence,” states the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017.
The bill also obliges banks to deal with APRA in an “an open, constructive and cooperative way”.
In conducting its business a bank must take reasonable steps to “prevent matters from arising that 18 would adversely affect [its] prudential standing or 19 prudential reputation”.
Similar obligations are imposed on individual executives covered by the regime.
Banks will have to outline to APRA the particular responsibilities held by an accountable person using an “accountability map”.
Under the new rules, a portion of the remuneration of banking executives covered by the BEAR will be have to be deferred “to incentivise accountable persons not to engage in behaviours inconsistent with BEAR obligations”.
Up to 40 per cent of the variable remuneration of CIOs and CTOs of banks will be deferred for at least four years (or a shorter period if approved by APRA).
APRA will be able to seek court-imposed civil penalties if a bank fails to meet its obligations under the new rules. Individuals covered by the regime face potential disqualification or a reduction of variable remuneration.
APRA will be able to seek Federal Court orders disqualifying an accountable person, including a CIO or CTO, from acting in a particular position. “These mechanisms are intended to incentivise good behaviour and ensure that banks and individuals are held to account where they fail to meet the standards expected of them,” a statement from Morrison said.