The government’s financial accountability reform bill was passed in the Senate yesterday, extending executive accountability rules beyond banks to include the superannuation and insurance industries. The Financial Accountability Regime Bill 2023 extends the obligations first introduced in the Banking Executive Accountability Regime in 2018 and replaces BEAR for the banking industry. The BEAR legislation will be repealed.  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.  Two area where the obligations in FAR go beyond those in BEAR are that accountable persons must deal “in an open, constructive and co-operative way” with both APRA and ASIC, and they must take reasonable steps to prevent matters from arising that would result in a material contravention by their accountable entity of certain financial sector laws. The obligation to take reasonable steps to prevent breaches of the law will only be triggered by material and significant breaches. But a large number of often-repeated occurrences of minor breaches could be taken to indicate a systemic issue of non-compliance and that could amount to a material contravention. FAR obligations cover directors and senior and influential executives. Companies are to nominate executives to be responsible for areas of business operations. For a foreign accountable entity in the banking or insurance industries, the accountable person’s responsibilities will relate to the Australian branch of the entity, rather than to the entity as a whole. FAR includes a deferred remuneration obligation that 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 four years and remuneration 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.  A move by the Greens in the Senate to amend the bill to add civil penalties for breaches was not supported. Another 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 investigative powers under law. 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 non-compliance.  Obligations imposed on auditors and actuaries under the Banking Act and other industry acts administered by APRA will be extended to cover FAR. This means that auditors and actuaries will have to assist APRA in performing its functions under FAR. The regime will apply to the banking industry six months after royal assent and 18 months after royal asset for the insurance and superannuation industries.