The Financial Accountability Regime (FAR) start date for the insurance industry has been finalised after legislation for the Hayne royal commission recommendation received Royal Assent last month.

FAR co-administrators, the Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC), say the regime will apply first to the banking sector on March 15 next year, followed by the insurance and superannuation industries on March 15 2025.

ASIC and APRA announced the start dates today as they commence joint administration of FAR, which replaces and extends the Banking Executive Accountability Regime (BEAR) with significantly tougher accountability obligations.

The two regulators have prepared an information package to help the financial service industry get their businesses ready for FAR.

Unlike BEAR, which applies only to the banking sector and was overseen solely by the prudential regulator, FAR applies to all APRA-regulated entities and introduces conduct-focused prescribed responsibilities on directors and most senior executives.

Penalties for directors and executives who fail to comply with FAR are severe. They can be penalised with a loss of income or disqualified from working in the sector.

“Just as the BEAR has helped to sharpen risk culture and governance in the banking sector, we expect the FAR to have a similar positive impact in improving standards of accountability across insurance and superannuation,” APRA Deputy Chair Margaret Cole said.

She says APRA is working closely with ASIC to ensure a smooth transition from BEAR to the new regime and urged industry to engage with the two regulators in the lead up to the commencement of FAR.

ASIC Deputy Chair Sarah Court says FAR will provide accountability in relation to conduct failures.

“We believe the regime will increase transparency and accountability in financial firms and help embed a culture of accountability for misconduct at an individual level – accountable individuals will need to understand and closely engage with their obligations under the FAR,” Ms Court said.

Law firm Clyde & Co has described FAR as “arguably the most significant change” to Australia’s financial services regulatory landscape in a generation.

“The FAR is a regulatory hydra. It is easy to understand in theory, but difficult to implement in practice,” Clyde & Co says.

While other APRA-regulated entities have until 2025 to get ready, consultancy Deloitte says “experience tells us that the sooner you get started, the better”.

“Ideally the organisation is operating in a FAR-ready state in advance of ‘go-live’ and has had an opportunity to test business-as-usual (BAU) processes in a BAU environment without the risk of breaching any of the FAR obligations,” Deloitte says.