Explanatory Memorandum
(Circulated by authority of the Minister for Financial Services & Regulation,the Honourable Joe Hockey, MP)Schedule 1 - Amendment of the Banking Act 1959
| Schedule 1 proposes a number of miscellaneous amendments to the
Banking Act 1959
(the Banking Act) designed to enhance the prudential regulation of ADIs. These amendments include:
Further amendments to the Banking Act will grant the Treasurer the power to delegate the unclaimed moneys provisions, in the Banking Act, to other portfolio agencies in addition to the Department of the Treasury. |
Granting APRA the power to issue directions
6.1 This item permits APRA to issue directions to a body corporate, (that is an ADI or a Non-Operating Holding Company) if it is likely to breach a prudential regulation or standard and the breach poses a prudential risk.
6.2 This amendment is designed to widen APRA's directions-making power to encompass circumstances of potential prudential risk. Presently, it is limited to circumstances where prudential standards have been breached and/or a direct link to depositors' interests has been established.
6.3 Items 2 and 3 provide APRA with the power to issue directions to a body corporate if it is conducting its affairs in an improper or financially unsound manner.
6.4 A similar provision existed in the Australian Financial Institutions Commission (AFIC) Code, which applied to building societies, credit unions and friendly societies prior to transferring to the Commonwealth's regulatory regime on 1 July 1999.
Broadening the definition of 'information' in section 13 to include books, accounts and documents
6.5 This proposed amendment clarifies that in section 13, the reference to information includes books, accounts or documents. The object of the amendment is to bring the reference to information in section 13 in line with its meaning given in section 61.
APRA has the power to appoint itself to investigate the affairs of an ADI
6.6 The object of this proposed amendment is two fold first it ensures that the reference to information includes books, accounts and documents. This is in accordance with item 4.
6.7 Secondly, in line with items 7 - 10, this item states that APRA has the power to investigate the affairs of an ADI, as well as the power to appoint a person to do so, if an ADI fails to supply information under section 13 of the Banking Act.
6.8 This amendment clarifies that APRA has the power to investigate the affairs of an ADI under section 13A of the Banking Act.
6.9 These items clarify that an investigator (appointed under sections 13 or 13A) is entitled to the books, accounts and documents of an ADI under investigation and amends offence provisions accordingly. Currently, an investigator only relates to a person appointed by APRA. The object of this provision is to ensure that section 13B is consistent with the changes made by items 5 and 6 (ie APRA or a person appointed by APRA would be termed an investigator).
6.10 Items 5 and 6 state that APRA, or a person appointed by APRA, have the power to investigate the affairs of an ADI under certain circumstances.
Broadening the definition of 'information' in section 62 to include books, accounts and documents
Items 11, 12, 13, 14, 15, and 16
6.11 Similar to the proposed amendment made by item 4, these items clarify that in section 62 the reference to information includes books, accounts or documents. The object of these amendments is to bring the reference to information in section 62 in line with its meaning given in section 61.
Conditions and section 63 approvals
Conditions on consent to restructure an ADI
6.12 This item extends the delegation provision contained in section 63 to also include the functions proposed under section 64.
- -
- Section 64 gives the Treasurer (or delegate) the power to attach conditions to his or her consent granted under section 63. To be consistent with section 63, it is necessary to also delegate the conditions-making power under the proposed section 64.
6.13 The proposed section 64 is designed to give the Treasurer (or delegate) the opportunity to attach conditions to his or her consent granted under section 63 and to provide remedies in the event conditions are breached.
6.14 In line with similar conditions-making powers throughout the Banking Act, the Treasurer (or delegate) is able to impose conditions and/or revoke, further, or vary conditions already imposed. If a condition has been breached, the Treasurer has two options revoke his or her consent under paragraph 64(2)(c) or apply for an injunction under the proposed section 65A.
6.15 Conditions that are imposed, furthered or varied, may be made by the Treasurer (or delegate) on his or her own initiative or on application to the Treasurer (or delegate) by the person who has applied for or has received consent.
6.16 This item ensures that conditions cannot be attached to consents that have been granted prior to the commencement of the proposed section 64.
6.17 The object of this item is to grant the Treasurer, APRA, ASIC and/or members of an affected ADI, the power to seek an injunction if there has been a contravention (or attempted contravention) of a provision of sections 7, 8, 66, 66A or 67 or a condition imposed under the proposed section 64.
6.18 Under the present legislation, sections 7, 8, 66, 66A and 67 contain penalty provisions. However, these amendments are designed to allow APRA, subject to court approval, to act preemptively to stop undesirable activities rather than simply acting to impose punishment after the damage has occurred.
- -
- In the case of a contravention of sections 7, 8, 66, 66A or 67, APRA has the power to seek an injunction. If a condition under section 64 has been breached, the Treasurer and/or APRA have the power to seek an injunction. If the condition relates to a demutualisation, ASIC and/or members of the affected ADI are also able to seek an injunction, in addition to the Treasurer and/or APRA.
- -
- The term 'demutualisation' takes the meaning given in section 63.
6.19 It should be noted that any breach of a condition, made under sections 66 or 67, is also covered by the proposed section 65A.
6.20 A range of injunctions are available including restraining injunctions, performance injunctions, consent injunctions and interim injunctions.
6.21 In addition to or in substitution of granting of an injunction, the court may require the person receiving (or who would have received) the injunction to pay damages to another person.
6.22 The purpose of this item is to enable the Treasurer to delegate the unclaimed moneys function to other Treasury portfolio agencies in addition to the Department of the Treasury. Presently, there are various unclaimed moneys functions managed by different agencies across the Portfolio, including provisions in the Life Insurance Act 1995 and the Corporations Law, which are currently administered by ASIC.
6.23 These amendments are designed to facilitate the rationalisation and consolidation of the above functions into one office or agency.