Two financial services reform bills, one to establish the Compensation Scheme of Last Resort and the other to establish the Financial Accountability Regime, were passed in the House of Representatives this week and moved to the Senate. Both are controversial and may face moves to amend them. Compensation Scheme of Last Resort. The CSLR will provide compensation to consumers where they have an Australian Financial Complaints Authority determination in their favour and where the relevant financial institution has not paid the consumer in accordance with the determination. Court and tribunal rulings will be outside its scope. Compensation will be capped at A$150,000, even though AFCA can order compensation up to $540,000. AFCA determinations must relate to products or services under the following headings: credit activity, financial product advice and dealing in securities. Managed investment schemes are not covered. Compensation under the CSLR is intended to be available for eligible complaints made to AFCA since AFCA commenced operations in November 2018. Australia’s 10 largest banking and insurance groups will pay a one-off levy to fund accumulated unpaid claims between November 2018 and September 2022. Critics have argued that the scheme’s compensation cap is too low, court and tribunal rulings should be covered, managed investment schemes should be included and more historical non-payment of compensation should be covered. There may be attempts in the Senate to amend the bill along these lines but the Coalition introduced an almost identical bill before the last election and is likely to support this one. Financial Accountability Regime. FAR extends the obligations first introduced in the Banking Executive Accountability Regime in 2018 to the superannuation and insurance industries and replaces BEAR for the banking industry. The BEAR legislation will be repealed when FAR is passed.  Like BEAR, FAR imposes obligations on directors and senior executives to conduct their business honestly and with care, skill and diligence. The aim is to improve the risk and governance cultures of financial institutions and to promote improved performance and stability of the financial system. The obligations cover directors and senior and influential executives. Companies are to nominate executives to be responsible for areas of business operations. A deferred remuneration obligation is designed to ensure remuneration is reduced if accountability obligations are not met. At least 40 per cent of variable remuneration of the accountable person must be deferred for a minimum of our years and will be reduced if there is non-compliance with accountability obligations. There are “enhanced” deferral arrangements for significant financial institutions. Companies and accountable persons will be required to take action in response to non-compliance. Companies will have to report breaches and there may be civil penalties for contraventions. One significant change in the shift from BEAR to FAR is that, while BEAR was administered by APRA, FAR will be administered by ASIC and APRA. The regulators have power to disqualify someone from being an accountable person of an entity or a class or entities regulated by the regime. They also have the power to direct an accountable entity to reallocate the responsibilities of its accountable person to address a risk of