Accountability in the banking sector: Australia and the United Kingdom

Abstract

More than ever, society needs financial institutions that work effectively and competitively, and who operate in a way where consumers can trust their banks. This article will discuss recent initiatives seeking to reform the banking sectors in both Australia and the UK. These initiatives have been introduced following increased scrutiny and criticism of the sectors since the 2008 Global Financial Crisis (GFC) and the 2012 London Inter-Bank Offering Rate (LIBOR)1 scandal. In Australia, the Banking Executive Accountability Regime (the BEAR) was introduced into legislation in February 2018. The BEAR has been modelled on the framework of the comparative legislation in the UK, the Senior Managers’ Regime (SMR), which is overseen by the Financial Conduct Authority (FCA). The FCA replaced the “approved persons’ regime” for banks, building societies, credit unions and dual-regulated investment firms in March 2016. The overarching objectives of the BEAR and the SMR have been to increase accountability within the Australian and UK banking sectors respectively with a view to restoring consumer confidence. This has become an important political focus following the GFC and LIBOR scandals, which were the result of, arguably, deep lapses in standards and the failings of core values and restraint of individuals and the entities within which they worked, to act consistent with overarching principles of public interest.2 This article will discuss the background to the BEAR and SMR initiatives and the theory as to why they were necessary. It will analyse the main objectives of the initiatives and how they are designed to be delivered. This will include a discussion of a recent decision of the UK Upper Tribunal Tax and Chancery Chamber, where the terms of the SMR were tested. To conclude, this article will consider the likely effectiveness of the BEAR in Australia in its current form.