6 things you need to know about the Financial Accountability Regime (FAR)
The long-awaited FAR bill has been passed by parliament and will have impacts across the financial services sector. FAR replaces the Banking Executive Accountability Regime (BEAR) and extends to insurance and superannuation industries.
The breadth of this regime will mean that implementation will likely be time consuming and require considerable change management across your organisation. To meet implementation timelines and to aid culture-change you may also require heavy consultation and aided stakeholder engagement.
“Clients often under-estimate the breadth of the regime. Getting the FAR mobilisation framework right within organisations will help to quickly establish responsibilities and accountabilities and foster collaboration across functions. “ – Annette Hang, Partner, Talent Solutions at Aon
Here are the 6 key things you need to know about FAR:
- Obligations for Accountable Persons (APs)
Act with honesty, integrity, due skill, care and diligence, cooperate with ASIC/APRA, and take reasonable steps to prevent matters that could affect an AE’s reputation or contravene laws. - Obligations for Accountable Entities (AEs)
Take reasonable steps to conduct business with honesty, integrity, due skill, care and diligence, cooperate with ASIC/APRA, prevent matters that may affect reputation, and ensure compliance of APs and Significant Related Entities (SREs). - Key Personnel Obligations
AEs are to ensure that APs and SREs’ responsibilities cover all aspects of operations, and comply with any regulator directions to reallocate responsibilities. - Deferred Remuneration Obligations
AEs are to defer at least 40% of variable remuneration for APs for min. 4 years (with limited exceptions). Remuneration policies must comply with these obligations. - Notification Obligations
Notify regulators if there are any changes to APs, an AP’s variable remuneration due to failure to comply, or an AP or AE has breached accountability obligations. - Accountability Maps and Statements
Enhanced compliance entities are those that meet an asset threshold for the industry sector. They will be required to prepare and submit accountability maps and statements to ASIC/APRA.
Who is impacted by FAR?
- Authorised Deposit-taking Institutions (ADIs) and their authorised non-operating holding companies (NOHCs)
- General, Life, and Private Health insurers and their registered or authorised NOHCs
- Registrable Superannuation Entities (RSEs)
Implementation timelines:
Depending on the type of organisation, the implementation timeframe will either be 6 months or 18 months from the commencement of the FAR.
“Many financial services organisations may be experiencing change fatigue from navigating new prudential and governance requirements over recent years. The passing of the FAR bill will exert additional demands and entities are wise to consider how FAR will interact with their existing obligations under APRA CPS-511 to ensure they consider implementation in the most effective and efficient way.” – Annette Hang, Partner, Talent Solutions at Aon
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Need help? Introducing the FAR Kickstarter Packages
Our consultants have designed practical and customisable tools that can be tailored to suit the requirements of your organisation. The solutions combine best practice observed in market and the requirements of the FAR. Additionally our consultants can distil the core requirements of the FAR and present it in a format that can aid internal stakeholder conversations and help visualise the breadth of the regime.
Packages include:
- Infographics of FAR framework mobilisation
- FAR policy starters
- Sample implementation roadmap
- Templated accountability statements
- Maps