Treasury starts FAR Minister Rules consultation

Treasury is seeking submissions for exposure draft Minister Rules for the Financial Accountability Regime (FAR).

The consultation follows the introduction of the FAR Bill 2022 in parliament by Financial Services Minister Stephen Jones. Legislation for FAR was introduced by the previous Morrison Government but passage was halted after parliament was dissolved for the May federal election.

The FAR Act implements key recommendations from the Hayne royal commission, which called for extending the Banking Executive Accountability Regime to other Australian Prudential Regulation Authority (APRA) regulated industries including general insurance.

An explanatory statement from Treasury says the FAR Act introduces a new accountability regime for institutions and their senior executives in the banking, insurance, and superannuation sectors. The regime will be jointly regulated by APRA and the Australian Securities and Investments Commission (ASIC).

Mr Jones says in a statement the Minister Rules would prescribe particular responsibilities and positions which cause a person to be subject to the FAR for each industry.

The Rules also set out enhanced notification threshold, which is the total asset size above which an entity is required to comply with additional notification obligations and how a written record from an examination can be authenticated in a proceeding as prima facie evidence of the statements it records.

Specific to general insurance, a general insurer meets the enhanced notification threshold at a time during a financial year if its total asset size equals or exceeds $2 billion at the start of the financial year of the entity.

McCabes Principal Mathew Kaley says the FAR Rules are mostly consistent with a previous Treasury paper released last year except in two areas relating to Accountable Person and Non-Operating Holding Companies.

The FAR Minister Rules do not require an Accountable Person to be appointed with “end-to-end product responsibility” as was proposed last year.

For Non-Operating Holding Companies, it is proposed that only Board members will need to be appointed as Accountable Persons. It will not be necessary for the CEO, CFO, CRO and Head of Internal Audit to be appointed as Accountable Persons of the NOHC, as proposed last year.

The FAR Bill will commence on the day after it receives royal assent and is expected to apply to general insurers 18 months after commencement, which would be around March 2024.

Closing date for submissions is October 7.

Click here for the exposure draft.