If Hayne delivered any surprises, the expansion of a Banking Executive Accountability Regime (BEAR) type regime to all APRA-regulated entities was not one of them. Senior accountability is an unstoppable force, and will march well beyond the borders of financial services, just as it is already becoming real elsewhere in the UK, Singapore, Hong Kong, and South Africa. After banks finish their transition into BEAR by 1 July, insurers and superannuation trustees are next in line. Many are already preparing to implement similar reforms, and expect it to arrive sooner rather than later. In many ways, accountability regimes like BEAR makes complete sense. They call for establishing and documenting what Directors and the most senior executives are accountable for, setting up standards of conduct, and being held to account through remuneration and reputational consequences. Those standards of conduct are difficult to argue with, even though their true meaning will only be clear with time. They are to act honestly and with integrity; take due care and diligence; be open, co-operative and constructive with APRA (and soon ASIC), and take steps to protect the organisation’s prudential standing and prudential reputation. Since BEAR is a regulatory change, it is tempting for organisations to imagine it is a compliance project. But this veers wide of the point. BEAR is – at its heart – about cultural change. It pivots around making sure organisations and their most senior people prevent, detect, and properly fix problems. Since BEAR is about the personal impact on the executive, when we work with them to drill into each of their accountabilities, and test the strength of their governance, their decision-making and the systems underneath each one, what needs to be improved becomes much clearer. While the remuneration aspects of BEAR – the deferral of part of variable pay – has gathered particular attention, this is in reality the least important aspect of what is really driving cultural change. The reality is no-one wants to fail, or to be seen to have failed. Much of BEAR’s potency is not just what is law; it is also the environment. Regulators are ramping up their powers and asking ‘Why not litigate?’ Boards and executives are being held to community, and not just legal, standards, in an atmosphere fuelled by overwhelming regulatory reform, waves of painful cost-cutting, and the setting adrift of corporate problem children. There are heads on sticks, all around. With the good, then, comes the bad. Senior leaders will be judged in the harsh glare of hindsight. Coupled with the broader environment, BEAR can create risk-averse behaviours and cause executives to want everything to be signed-off and documented to within an inch of its life before they are comfortable making a decision. It can shift culture from a lack of accountability to heightened paranoia. Regulators are already asking accountable executives under BEAR for attestations on compliance. Executives are loaded with more and more responsibility, creating a genuine bandwidth challenge. As we have helped transition executives to the regime, it seems they have no time to worry about the risks and problems they don’t know about, because what’s on their plate is already overwhelming. One of the least prominent obligations in BEAR is that the ADI – the Authorised Deposit Taking Institution or bank itself – has almost the same obligations as the individuals caught by the regime. It also has to take reasonable steps to ensure both Accountable Persons and Subsidiaries meet certain obligations. This makes it clear. A bank can’t just set an executive adrift and say: “It’s your accountability, make sure you comply.” Their fates are deeply entwined. The bank and their ‘Accountable Persons’ need to be in every problem or issue together in order to solve it. Accountabilities should be systematically made clear at least one level below the executives to ensure they can meet their obligations. And systems and expectations should be set up to support the right outcomes. Accountability regimes like BEAR can drive meaningful cultural change. But they must be tackled in the right way, with persistent focus and investment on getting it right and delivering the upsides, while being alive to – and addressing – the cultural danger zones. For more commentary from Deloitte on the Royal Commission click here.