The Australian Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill has been passed by Senate and Royal Assent is assured, if it has not already been granted. The law grants the Australian Prudential Regulation Authority sweeping powers, with some claiming that some of its terminology goes so far as to sanction arbitrary bail-ins.

The Banking Executive Accountability Regime (BEAR) that the Bill sanctions is a watered-down version of the British Senior Managers and Certification (SM&CR) regime. Under it, APRA can disqualify an 'accountable person' for failing to obey it; banks are obliged to tell the regulator about the jobs and responsibilities of each accountable person; APRA may try to persuade the courts to impose civil penalties on banks that disobey the law; every bank must align its remuneration policy to the law; and it must defer a part of the pay of an accountable person for four years, although there are some exceptions to this. According to Mortgage Business, ADIs face civil penalties of up to A$210 million (US$164 million) if they break it.

The Australian Bankers' Association criticised the legislation in the summer with the observation that "a standalone APRA-regulated insurer should be held to [the] same standard as an insurer within a banking group; this would give customers of non-ADIs (entities that the Government does not classify as authorised deposit-taking institutions or ADIs) equal protections," adding that inconsistencies are bound to create competitive and regulatory distortions, along with gaps in the body of law that protects consumers from sharp practice.

The Bill - possibly now an Act - contains more controversial clauses which give APRA powers to 'resolve' banks in the case of systemic failure or another financial crisis. Dr Wilson Sy, a former principal researcher at APRA, said in a submission to a recent Senate inquiry that, contrary to repeated government assurances, the Bill has ensured that Australian bank deposits are not guaranteed up to up to the promised A$250,000 (US$195,500) by the Financial Claims Scheme (FCS).

Under the Banking Act 1959, which the new law amends, APRA is responsible for two potentially conflicting objectives: the protection of depositors AND the promotion of financial stability. This depositor protection is “illusory”, according to Dr Sy, because the Banking Act does not give either objective priority. Under the new law, indeed, APRA has the discretionary power to decide which objective has priority and, rather alarmingly, it will be able to make such a decision “in secrecy”. Sy refers to Subdivision D, section 11CH, which states that APRA may decide that its orders must be kept secret if it is “necessary to protect the depositors of any ADI OR to promote financial system stability”. (Emphasis added by Sy.) The replacement of “AND” with “OR” confirms that the objectives are in potential conflict. It therefore appears that the Bill grants APRA discretion to decide in secret whether to protect depositors or to make the financial system more stable.

The world of bail-ins

In 2014 the regulator admitted that the FCS (the Australian equivalent of the UK's Financial Services Compensation Scheme, which does not apply solely to banks but to the whole financial sector) lacks the money to guarantee deposits at any of Australia's four largest banks, which hold 80% of all deposits. This fact first came to light at a meeting of Australia’s Council of Financial Regulators (APRA, the Australian Securties and Investments Commission and the Reserve Bank of Australia) on 19 June 2009 whose minutes state that a failure of one of them would “exceed the scheme’s resources.” Later, the Financial Stability Board in the Swiss city of Basel, whose aim it is to impose bail-in regimes on the whole world, noted in its “Peer Review of Australia” on 21 September 2011 that the Government’s A$20 billion (US$15.6 billion) provision per bank “would not be sufficient to cover the protected deposits of any of the four major banks,” which each have more than A$400 billion (US$312 billion) in deposits.