Government cracks down on bankers behaving badly

Government cracks down on bankers behaving badly

The federal government has moved one step closer to introducing new accountability rules for senior bankers.

The Treasury has released a consultation paper for its proposed Banking Executive Accountability Regime (BEAR), which aims to increase the accountability of authorised deposit-taking institutions (ADIs), as well as their director and senior executives.

“The BEAR will provide greater clarity regarding their responsibilities and impose on them heightened expectations of behaviour in line with community expectations,” Treasury said.

“Where these expectations are not met, APRA [the banking regulator] will be empowered to more easily remove or disqualify individuals, ensure ADIs’ remuneration policies result in financial consequences for individuals, and impose substantial fines on ADIs.”

People need to have faith in their bankers

In recent years, there has been growing community concern about culture and behaviour in banks, according to Treasury’s consultation paper.

“There have been too many instances where participants have been treated inappropriately by banks and related financial institutions,” it said.

It is “imperative that participants have trust in the system” if it is to operate in an efficient, stable and fair way.

“It must operate at the highest standards and meet the needs and expectations of Australian consumers and businesses,” the consultation paper said.

“Participants need to be confident that financial firms will balance risk and reward appropriately and serve their interests.”

Who should be held accountable?


One of the BEAR’s aims is to provide greater clarity about the responsibilities of the most senior bankers – but this poses challenges.

On the one hand, Treasury doesn’t want the net of responsibility to be cast so narrowly as to exclude people with effective responsibility for management and control.

On the other hand, it doesn’t want the net to be cast so wide that responsibility can be deflected. “The risk is that if everybody is responsible, nobody will be accountable.”

Anyone defined as an ‘accountable person’ will be held to “a heightened standard of responsibility and accountability” under the new regime.

Banks need to change their salary policies

In this year’s budget, the federal government made two announcements about senior bankers’ pay:

  • Between 40-60 per cent of an executive’s variable remuneration will be deferred for at least four years
  • APRA will have stronger powers to require lenders to change their remuneration policies when APRA believes they’re producing inappropriate outcomes

Treasury’s consultation paper said lenders should ensure that their payment structures did not incentivise a short-term focus or excessive risk-taking.

“Deferring variable remuneration is aimed at providing an appropriate period of time for risks to crystallise and for variable remuneration to be adjusted downwards as a result. The intention is to better align the realisation of risk with reward,” it said.

“A potential consequence of requiring variable remuneration to be deferred is that firms may adjust pay structures, shifting the balance of payment from variable to base remuneration.

“As a result, individuals may face reduced incentives to engage in, or create a culture of short term excessive risk taking.”

The BEAR’s next step

The Treasury has invited people to comment on its consultation paper, with submissions due by 3 August.

For the BEAR to become law, the government would then have to introduce new legislation, which would then have to be approved by parliament.

Given the timeframe, it is unlikely that any new rules would be introduced in 2017.

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Learn more about savings accounts

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Should I open a Commonwealth locked savings account?

If you have trouble saving money, a Commbank locked savings account could be a potential solution. A locked savings account won’t let you make withdrawals and as such, it can help you grow your savings balance if you keep topping it up. 

The Commonwealth locked savings account advertises high-interest rates and minimal maintenance fees, along with a host of other incentives that will encourage you not to touch the money. 

The account offers a higher interest rate for each month that you make limited or no withdrawals, as well as regular deposits. 

To qualify for a Commonwealth locked savings account with the advertised features, you will need to fulfil specific criteria such as:

  • Depositing a fixed minimum amount into the account every month.
  • Making a fixed number of deposits each month.
  • Making a minimum or no withdrawals each month.
  • Maintaining a minimum account balance.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.