APRA Consults on Approach to Product Responsibility under BEAR

APRA proposes to require ADIs to identify and register an accountable person to hold end-to-end product responsibility for each product offered to customers.

APRA (the Australian Prudential Regulation Authority) is seeking feedback on its proposed approach to determining end-to-end product responsibility for each ADI (authorised deposit-taking institution) subject to BEAR (the Banking Executive Accountability Regime).

The proposal stems from a Royal Commission recommendation, which said APRA should determine an additional prescribed responsibility for all steps in the design, delivery and maintenance of all products offered to customers by an ADI, with an aim to improve customer experience and outcomes.

Specifically, the final report recommended that this responsibility be allocated to a single accountable person of an ADI. This individual should also be responsible for remediation of customers in respect of any of the products for which they are assigned responsibility.

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As such, APRA has released a letter to ADIs outlining how it intends to achieve heightened and clarified product accountability among senior executives. It proposes to require ADIs to identify and register an accountable person to hold end-to-end product responsibility for each product offered to customers.

The letter requests feedback on four key considerations relating to implementing the proposed product responsibility requirements:

  • Scope of accountability: In addition to product design, delivery and maintenance, APRA proposes that accountability extends to issues such as customer remediation, linkages to IT systems and data quality, outsourcing, and incentive arrangements.
  • Product coverage: APRA proposes that a single-point accountability for a given product would be required for all retail and non-retail products and services offered by an ADI or ADI group, including white-label and other-branded product.
  • Legal mechanism: As recommended by the Royal Commission, APRA proposes a legislative instrument to add the end-to-end product responsibility in the Banking Act, and to require ADIs to reflect this for a given product or product group in the accountability statements.
  • Joint accountability: APRA proposes that joint accountability be applied to all accountable persons identified for a particular product or product group to ensure no gaps or dilution in the end-to-end accountability, where all relevant accountable persons will be equally accountable.

APRA seeks input on any area that may impact the core objective of an ADI achieving heightened and clarified end-to-end accountability for each product offered. The regulator is also keen to understand how many products or product groups ADIs would be likely to have, and how many accountable persons would be likely to hold the proposed end-to-end product responsibility.

Although the requirements are directly applied to locally incorporated ADIs, APRA strongly encourages all foreign ADIs to consider how they could apply end-to-end product responsibility to their Australian operations. APRA also suggests that insurers and superannuation licensees should provide feedback, given that BEAR will be extended to all APRA-regulated entities.

The consultation letter, available here, is open for feedback until 23 August 2019.

APRA aims to release a draft schedule with the proposed product responsibility requirements for further consultation in October 2019, and the final legislative instrument in December 2019.

The new requirements are expected to be implemented by 1 July 2020.

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