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Monday, 4 September 2023
Page: 96

Senator WATT (Queensland—Minister for Agriculture, Fisheries and Forestry and Minister for Emergency Management) (19:22): I'd like to thank those senators who have contributed to this debate. Together these bills implement the Financial Accountability Regime. Through these bills, the government is finalising the necessary action to ensure that financial institutions are meeting the community's expectations and to ensure that their executives face real consequences if those expectations aren't met. The Financial Accountability Regime delivers on the government's commitment to finalise the implementation of five recommendations from the banking royal commission. The FAR will increase the accountability of financial institutions in the banking, insurance and superannuation industries and their most senior executives and directors, restoring trust and confidence in a sector that plays an integral role in the wellbeing of all Australians in our economy.

The FAR imposes four core sets of obligations on accountable entities and accountable persons. Firstly, accountable entities and accountable persons must conduct their business in a proper manner, which includes acting with honesty and integrity and with due skill, care and diligence, dealing with the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission in an open, constructive and cooperative way, preventing adverse impact on the accountable entities' prudential standing and preventing breaches of certain specified financial services laws by the accountable entity. Further, accountable entities must ensure clear identification of accountabilities for accountable persons in the organisation across key areas of operations and defer at least 40 per cent of the variable remuneration of accountable persons for a minimum period of four years. Variable remuneration will be reduced where accountability obligations are breached.

The FAR will be supported by the imposition of notification obligations which require accountable entities to provide APRA and ASIC with information on responsibilities of their accountable persons or breaches of certain obligations. After an ASIC will jointly administer the FAR. They will have the power to disqualify accountable persons, investigate breaches of the FAR, direct entities to take action and apply to the Federal Court to impose a civil penalty on accountable entities.

The government's also grateful for Senator David Pocock's engagement on the FAR bill, particularly in relation to the ministerial exemption power, which is expected to be exercised in very rare circumstances. We have incorporated the amendments that Senator Pocock proposed last year to more clearly articulate the scope of this power and to provide for parliamentary oversight.

The government will, however, not accept the amendment moved by the Australian Greens to introduce individual civil penalties for breaches of accountability obligations. The government's bill already contains effective measures to address executive failures to comply, including disqualification, loss of deferred bonuses and individual civil penalties for assisting in an entity's contravention of its obligations. These sanctions are on top of penalties for misconduct already in place in other financial services laws. These measures are finely balanced to improve executive conduct in the financial services sector without adversely impacting the sector's efficiency. Adding individual civil penalties is not likely to substantially increase the level of deterrence that already exists, while it may impact on firms seeking to attract and retain the best executive talent. I commend these bills to the Senate.

Question agreed to.

Bills read a second time.