The Banking Executive Accountability Regime legislation was passed in the Senate yesterday.
The legislation aims to incentivise good behaviour and ensure banks and individuals are held accountable for their actions if they fail to meet the expected standards.
Under the regime, banks will be required to register all senior executives and directors with APRA and provide greater clarity as to their responsibilities.
As such, APRA has been afforded broader enforcement powers and will now be able to apply substantial fines, issue disqualifications with greater ease and ensure banks' remuneration policies result in financial consequences for individuals.
Federal Treasurer Scott Morrison said: "This legislation is part of a broader suite of financial services reforms delivering on the Turnbull Government's commitment to put consumers first, ensuring Australians can have trust and confidence in the banking system."
Large authorised deposit-taking institutions will need to be BEAR compliant by 1 July 2018, though small and medium ADI's have been afforded an additional 12 months to comply given their smaller operating costs.
Responding, the Customer Owned Banking Association said it was pleased small and medium institutions have been given more time to prepare.
"It's very pleasing that the Government and the Opposition recognise the importance of customer owned banking and the vital role it plays in delivering diversity and competition in retail banking," COBA chief executive Michael Lawrence said.
He added that it is critical to minimise regulatory expenditure on smaller banking institutions when promoting a more competitive banking market as such costs are ultimately passed on to the customer.
"More time for small and medium banking institutions to prepare for the BEAR in an orderly way will reduce the cost burden that would otherwise apply," he said.