April 11, 2023
Estimated reading time: 3 minutes
What are BEAR and SEAR?
BEAR and SEAR are the individual accountability frameworks for senior executives in financial institutions based in Australia (BEAR) and Ireland (SEAR). The regimes have been created within the last 6 years to define responsibility and decision-making, ultimately increasing transparency and trust within financial services.
What is BEAR?
BEAR stands for Banking Executive Accountability Regime. It was established by the Australian Prudential Regulation Authority (APRA) in October 2017 to increase accountability for authorised deposit-taking institutions (ADIs) and their senior leadership teams.
The BEAR requires two sets of obligations:
- From the organisation.
- From individuals who are deemed accountable.
Each individual will prepare an accountability statement, and an overall accountability map must be drawn for every business.
Some examples of their obligations include:
- Honesty, integrity and due diligence.
- Cooperation with the APRA.
- Acting prudentially to prevent adverse effects.
Additionally, this framework gives the power to the regulators – enabling a complete dismissal if they are found to be an accountable person during a BEAR breach.
What is SEAR?
SEAR, the Irish-based regulation, refers to the Senior Executive Accountability Regime. Introduced in July 2018, it works alongside the Fitness and Probity enforcement in order to reform management in:
- Credit institutions (but not credit unions)
- Insurance undertakings
- Investment firms
Regulated by the Central Bank of Ireland, this framework also includes the creation of a statement of responsibility for each senior executive, and a responsibility map for the entire firm, outlining where each manager fits.
SEAR was introduced with the common conduct standards. These statements require accountable individuals to agree and act in the best interests of customers, work cooperatively with the Central Bank of Ireland and observe the proper standards of market conduct.
Why were BEAR and SEAR created?
In a broad sense, BEAR and SEAR were introduced to combat poor trust within the financial industry. Historical events such as the financial crisis of 2008 showed a huge lack of care within the sector, which has warned many away from participating in the markets.
Globally, there is now a worldwide trend emerging for individual accountability regulations. For example, in the United States, the New York City Bar has created a new framework for Chief Compliance Officer Liability in financial services. Each of these regulations, just like BEAR and SEAR, has the same goal – to increase transparency within financial services and encourage the public to participate.
Moreover, it’s hoped that BEAR and SEAR can improve the prudential actions of employees in the banking sector – in the sense that they will prioritise the needs of the customer. The penalties set out in both BEAR and SEAR make this a strong focus for the regulators.
Interestingly, BEAR and SEAR have been introduced after what most would call the ‘original’ accountability legislation, which is the UK’s SMCR. The Senior Managers Certification Regime came into force in 2016 and also involved the likes of conduct rules and statements of responsibilities for senior management.
However, there is a question mark over how well SMCR is actually working. In total, there have been 57 enforcement actions up until 2022. It is hoped that the regulators behind BEAR and SEAR can go further to enforce compliance.
Who must comply with BEAR and SEAR?
Generally, BEAR and SEAR apply to senior executives and entire organisations within financial services. Fortunately, the regulators are pretty specific about who they’re regulating.
BEAR compliance is for authorised deposit-taking institutions (ADIs) and their executives or directors. SEAR compliance is for the senior executives at credit institutions, insurance undertakings, and investment firms.
Requiring a statement of responsibility, codes of conduct, a responsibility map and more – compliant with BEAR and SEAR can feel overwhelming. CUBE is here to give you a helping hand. Drawing on over 10 years of experience, we help financial institutions to streamline their regulatory compliance on a global scale – simplifying processes in a modern and flexible way.
Keep ahead of emerging accountability regulations and guidance by speaking to CUBE.