What is FAR? The Financial Accountability Regime Explained

The Financial Accountability Regime (FAR) is Australia's strengthened individual accountability framework for senior executives at banks, insurers, and superannuation funds. It replaced the Banking Executive Accountability Regime (BEAR) and is jointly administered by APRA and ASIC.

FAR at a Glance

Who Does FAR Apply To?

Accountable entities: All APRA-regulated entities — ADIs (banks, building societies, credit unions), general insurers, life insurers, private health insurers, and RSE licensees (super fund trustees), plus their authorised NOHCs.

Accountable persons: Directors, CEOs, CFOs, CROs, heads of internal audit, and any other senior executive with significant responsibility for managing the entity. APRA determines who qualifies based on the nature and scope of their responsibilities.

The Six Core Obligations

1. Accountability Obligations (ss14-15)

Both entities and accountable persons must:

• Act honestly, with integrity, and with due skill, care and diligence
• Deal with APRA and ASIC in an open, constructive and cooperative way
• Take reasonable steps to prevent matters adversely affecting the entity's prudential standing or reputation

2. Accountability Statements (s18)

Every accountable person must have a written accountability statement lodged with APRA that sets out their specific responsibilities and how those relate to the entity's obligations. No gaps allowed.

3. Accountability Maps (s19)

Entities must maintain an accountability map showing governance structure, reporting lines between accountable persons, and how all responsibilities are allocated. The map must be kept current and provided to APRA on request.

4. No Gaps in Responsibility (s20)

All of the entity's responsibilities must be allocated to at least one accountable person. There can be no unallocated responsibilities — this is one of the biggest practical challenges for entities implementing FAR.

5. Deferred Remuneration (Part 4)

SFIs must defer at least 40% of variable remuneration for accountable persons for a minimum of 4 years. Entities must have the ability to reduce (malus) or recover (clawback) variable remuneration for accountability failures.

6. Notification (s22)

Entities must notify APRA within 14 days of a person becoming or ceasing to be an accountable person, or any material change to accountability statements or maps.

Why BEAR Was Replaced

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (2019) recommended extending individual accountability beyond banking. BEAR only covered ADIs, leaving insurers and super funds without equivalent accountability obligations. FAR addresses this gap by:

• Extending to all APRA-regulated industries
• Adding entity-level obligations (not just individual)
• Joint APRA/ASIC administration (ASIC enforces conduct-related obligations)
• Requiring accountability maps (visual representation of responsibility allocation)

Enforcement and Penalties

• Directions: APRA can direct entities to comply (s40)
• Disqualification: APRA can permanently disqualify individuals (s45)
• Civil penalties: Up to $1.11M for individuals, $11.1M for entities per contravention (s50)
• ASIC enforcement: ASIC has concurrent powers for conduct-related FAR obligations

Practical Compliance Steps

• Map all responsibilities — ensure every obligation the entity faces is allocated to at least one accountable person
• Draft accountability statements — clear, specific descriptions of each person's responsibilities
• Build the accountability map — visual governance structure showing all reporting lines
• Review remuneration policies — ensure deferral, malus, and clawback provisions are in place
• Register accountable persons — notify APRA before they commence in their role
• Train the board — directors are accountable persons and need to understand their FAR obligations

This guide is for informational purposes. Consult qualified compliance professionals for specific FAR obligations. GoComply chatbot covers the complete FAR Act with section references.