BEAR will impact bank wealth divestments

25 September 2017
| By Mike |
image
image
expand image

The Government’s Bank Executive Accountability Regime looks certain to impact the plans of the major banks to offload the wealth management and insurance arms of their operations, particularly if they intend to retain a stake in the operations.

As the ANZ contemplates floating elements of its wealth division, the Commonwealth Bank considers the future of its business and as National Australia Bank (NAB) retains a stake in MLC Life, the BEAR legislation explanatory memorandum makes clear that they may still be captured.

The wording of the explanatory memorandum suggests the safest route for the banks may be a total exit of some operations in circumstances where it said “consumers often associate the wide range of financial services and activities provided by subsidiaries under an ADI’s [bank’s] brand.

“Poor behaviour in a subsidiary can have a negative effect on the ADI’s brand and public standing and has the potential to undermine confidence in the ADI itself. Where the activities of a subsidiary are significant, then an accountable person should have responsibility for that subsidiary.”

The explanatory memorandum then explicitly states: “This is intended to capture, for example, large insurance or wealth management arms of an ADI. If an ADI’s wealth management arm acts in breach of BEAR obligations, then it may adversely affect the prudential standing or reputation of the ADI”.

The explanatory memorandum also makes clear that the new legislation will also capture foreign-owned banks, stating: “The BEAR applies to foreign ADIs. A foreign ADI is not subject to the BEAR for its offshore operations or for any locally incorporated non-ADI subsidiaries”.”

Given the breadth of the new legislation, the major banks are complaining that a seven day consultation period is not long enough for them to give their views on the draft legislation.

The Australian Bankers’ Association (ABA) chief executive, Anna Bligh has complained that the seven-day consultation period around the bill is “grossly inadequate” and represents “playing fast and loose with a critical sector of the economy”.

Urging the Government to extend the consultation period, Bligh said this was necessary to allow proper due diligence to ensure the objective of improving senior executive accountability was met.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 5 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

17 hours 38 minutes ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 3 days ago