27 April 2020
COVID-19 has forced regulators such as APRA and ASIC to reprioritise their regulatory agendas and this will likely impact the Financial Accountability Regime (FAR) in one way or another. This shouldn’t be viewed as a free pass by organisations, and an opportunity exists to start preparing early to ensure a smooth transition as programs of this nature require considerable time, effort and engagement with boards and executive teams.
The FAR consultation paper was released by Treasury at the end of January 2020 – and a lot has happened across the globe since. COVID-19 has posed unprecedented challenges for governments, industries, regulators, and our communities alike. APRA and ASIC both issued press releases on 23 March 2020 announcing a recalibration of their priorities in response to COVID-19. As a result, APRA’s supervision priorities, outlined in January 2020, will be largely suspended until at least 30 September 2020. Similarly, ASIC has suspended its near-term activities which are not time-critical, including the report on executive remuneration, updated internal dispute resolution guidance and consultation paper on managed discretionary accounts.
APRA has also advised that it does not presently plan to recommence consultation on any non-essential matters before 30 September 2020. It is important to note that the Department of Treasury have carriage of the FAR Consultation Paper and, given consultation on its proposed provisions closed on 14 February 2020, the first round of industry feedback is now with Treasury. As at time of publishing, it is uncertain as to whether draft legislation will be released by the end of 2020 as foreshadowed by the Proposal Paper.
The most recent and relevant update publicly available from Treasury is dated 5 March 2020, whereby the presentation by the Treasury Secretary to Parliament outlined that “implementation of the Government’s response to the Financial Services Royal Commission remains a priority for the Department, with most of the required legislation to be introduced into Parliament by mid-2020. Treasury is working closely with ASIC, APRA and the OPC to deliver on those timeframes.” This position could potentially change given the rapidly changing priorities in response to COVID-19, therefore, we will keep you informed as further information becomes available.
Consultation on the Proposal Paper closed on 14 February 2020. While there is clear support for government’s intent to increase overall accountability, peak superannuation and insurance bodies have expressed some concerns.
We acknowledge that the detail on many aspects of the FAR is yet to be clarified. The Government has yet to propose a commencement timeframe for implementation and given that COVID-19 is the current priority, it is yet to be seen whether the indicative end of year date for draft legislation will be impacted.
It is, however, important for organisations to consider their FAR strategy and how it aligns to the broader strategic and operational changes that may have already made, or intend to make, on the back of COVID-19. For example:
To manage and mitigate these impacts on an organisation’s FAR plan, start preparing early. Not only because with disruption comes a strategic opportunity to enable change, but also because in our experience, programs of this nature require considerable time and effort. This is further amplified by engagement required with Boards and Executive teams. We would encourage firms to undertake an assessment to determine the impact FAR will have on your organisation, and what this will mean in practice. Based on our work with clients on the BEAR and with the SMCR in the United Kingdom, we have highlighted the below ‘no regrets’ activities that firms should consider in the absence of draft legislation or timelines. These could include:
These ‘no regret’ activities will ultimately enable the success of the FAR program. But these activities will also have a number of related benefits including providing a health check on an organisation’s governance framework, reporting lines and controls. Many firms may have also come under significant organisation stress due to COVID-19 and there are benefits to be gained from this ‘real life’ scenario which can be used to their advantage to clarify and/or realign accountabilities and responsibilities.
While adapting to the challenges presented by COVID-19 will be the priority for all financial services firms, we would encourage foresight and due consideration to the FAR provisions that, while delayed, will be implemented. Acting early allows firms to ensure they are well prepared and equipped for a smooth transition.
If you have any questions regarding the content of this article and would like speak to someone from our team please contact us.