Like anything meaningful in life, what you get out of it depends very much on what you put in and that goes for the BEAR, writes Michael Cunningham, KPMG’s risk partner.
Not unsurprisingly, as the pace and complexity of life increases customers (read people) want more clarity and transparency as to who’s responsible and accountable for the delivery of their financial services experiences.
Tapping into this zeitgeist and global regulatory developments, the Federal Government introduced the Bank Executive Accountability Regime (BEAR).
In recent years, the number of sub-optimal customer outcomes in the provision of Australian financial services has heightened; governmental discomfort and frustration, regulatory scrutiny and customer (again read people) dissatisfaction.
The BEAR can be considered the (bitter) fruit of this confluence.
At its very essence, the proposed BEAR is an enhanced accountability framework for seniors in banks to help address and correct the concern that has grown to an unhealthy and unsustainable level.
In addition to prudential regulatory concerns, banks' social licence was being increasingly and seriously questioned, the deterioration in perceived integrity and subsequent trust had to be countered, head on.
Despite the initial setup and ongoing cost, and current punishingly-short time frames for implementation, history will judge the BEAR as being instrumental and successful in improving banks’ relationship and trust with the both the government and community.
Even bankers themselves – in the fullness of time – are expected to acknowledge that the BEAR was a necessary and cathartic process in demonstrating their willingness and commitment to be more transparent as to their activities, responsibilities, and accountabilities.
ADI's and Accountable Persons should see the benefits in leveraging the BEAR to improve the effectiveness of how they are organised and manage their responsibilities to deliver a better client experience.
How the ADI, its Board and Accountable Persons approach BEAR and embed it will ultimately say a lot about the culture of the firm, its leadership, and people.
To be abundantly clear, the proposed BEAR complements the existing regulatory framework, it doesn’t replace it.
As its motivation, design and implementation timeline has a strong political flavour, the challenge for its administrator - APRA - is how to incorporate it in their existing prudential framework.
How will they incorporate this into their existing Governance and Fit and Proper prudential standards is especially pressing.
The last thing the government and APRA want is a discordant, non-integrated, Frankenstein-like prudential requirement and monitoring responsibility.
Like anything meaningful in life, what you get out depends very much on what you put in.
The BEAR shouldn't be viewed as another ‘tick-the-box’ compliance exercise.
Evolution not revolution
Success and better accountability depends on how well it can be aligned to business as ususal and inculcated into the way banks deliver their services and products.
To this end, it’s critical that key stakeholders are engaged as early as possible, especially as this is expected to significantly change the ways of working across businesses and functions. It’s imperative in the early stages to clarify involvement and ownership of the operating model once BEAR is implemented.
Moreover, Accountable Persons and employees need to be trained and be fully aware of how BEAR impacts them, their role’s accountability & responsibility and how this fits into their organisation’s wider accountability map.
Experience from the UK in relation to the implementation of the Senior Manager Regime (from which the BEAR draws heavily) should encourage early industry engagement with the regulator where possible on design and format to drive efficiencies in implementation and avoid potential rework.
Despite its political and legislative delivery, the BEAR – reflective of societal expectations - is here and its absorption into the DNA and fabric of Australian financial services provision is more about evolution rather than revolution.