Explanatory Memorandum(Circulated by authority of the Minister for Financial Services and Regulation, the Honourable J.B. Hockey, MP)
5 Schedule 2 - Amendment of the Banking Act 1959
The purpose of Schedule 2 to the Bill is to amend the Banking Act in order to apply the Criminal Code, ensure the independence of the RBA, extend the bank holidays and unclaimed moneys provisions to all ADIs, expand the scope of the standards and directions powers and cover other miscellaneous matters.
5.1 Schedule 2 will commence on the day the Bill receives Royal Assent except for item 53, which will commence on the transfer date.
5.2 This item repeals the definition of a bank as it becomes superfluous with the proposed amendments in this Bill to the bank holiday and unclaimed moneys provisions of the Banking Act which extend them to all ADIs, including building societies and credit unions.
Items 2, 3, 19, 21 - 23
5.3 These items will facilitate the implementation of voluntary industry support arrangements by enabling them to provide for financial support and associated matters rather than just being limited to liquidity support. The reference to 'liquidity' in current legislation is frustrating the development of industry support measures because of definitional uncertainties surrounding this term. Since APRA will only certify those contracts that it considers appropriate to certify, there is no need to restrict the content of these contracts more narrowly than to the provision of financial support and associated matters such as, but not limited to, technical advice.
Items 4, 6 - 9, 24, 26 - 30, 32 - 46, 48 - 52, 56 - 59, 76 and 77
5.4 Item 4 applies the Criminal Code to all offences against the Banking Act. The Criminal Code sets out the general principles of criminal responsibility that will be applied to all offences in Commonwealth legislation. The Criminal Code is due to come into force in March 2000.
5.5 The Criminal Code will not change any of the existing offence or maximum penalty levels associated with conviction for any offence contained in the Banking Act. Instead, it will make the existing offences and associated penalties more transparent by including the descriptions as part of the relevant provisions of the Banking Act rather than being contained in a separate table of offences (currently section 69A). In addition, exemption orders made by APRA under section 11 of the Banking Act will continue to exempt an individual institution or class of institutions from the need to comply with all or specified provisions of the Banking Act.
5.6 This item will repeal sections 7 and 8 of the Banking Act, which prohibit certain actions, and replace them with provisions that comply with the Criminal Code. Further, the amended provisions explain in more detail the requirements on natural persons and bodies corporate under the Banking Act and the availability of possible exemptions.
5.7 Convictions under either proposed sections 7 or 8 contain maximum penalties of 200 penalty units and are indictable offences, meaning that a jury is responsible for determining guilt and the appropriate penalty level. Indictable offences are deemed to apply, unless the contrary intention appears, to bodies corporate as well as to natural persons.
5.8 Nothing in the Act or regulations is intended to limit the operation of section 4K of the Crimes Act 1914 . Section 4K states that where an act or thing is required to be done within, or by, a particular period then unless the contrary intention appears, the obligation to do the act or thing continues until the act or thing is done despite the specified time elapsing.
5.9 Under proposed section 8, if a body corporate is convicted of an offence then under subsection 4B(3) of the Crimes Act 1914 , the body corporate may be liable for a fine of up to five times that which would be the maximum applicable to a natural person. However, a natural person may also be guilty of an offence under this section if he or she aids or abets, directly or indirectly, or is party to, the body corporate in committing the said offence.
5.10 The RBA will not be guilty of an offence under proposed subsection 8(1) if it carries on banking business in Australia. This amendment will ensure that the RBA is not subject to regulation by APRA, thus ensuring its independence.
5.11 APRA has the power to issue standards on prudential matters for ADIs and authorised NOHCs. The proposed amendments will ensure that these standards powers can be applied to relevant classes or subclasses of ADIs and NOHCs, including allowing APRA to issue a standard that only applies to one (or more) specified ADI(s) or NOHC(s). This change is necessary to give APRA greater flexibility and certainty so as to impose the most appropriate form of prudential regulation for each ADI and NOHC.
5.12 This item will enable APRA to differentiate between various situations and activities with respect to standards.
Items 12 - 18
5.13 These proposed provisions will mean APRA is not required to meet the normal publication requirements where standards contain commercially sensitive information. Where a standard applies to one (or more) specified ADI(s) or NOHC(s), a copy must be provided to all specified ADIs or NOHCs as well as any variations or revocations of these standards.
5.14 This item clarifies that APRA's directions powers can be applied to any aspect of the matters specified in subsection 11CA(2), including part of an item or a group of items.
5.15 This item aligns the definition of an officer to that contained in section 9 of the Corporations Law. The term 'officer' is used in the Banking Act in relation to compliance with a direction imposed on an ADI or an authorised NOHC.
5.16 Under item 31, where a natural person is convicted of an offence for failing to comply with the requirements of proposed subsection 14A(2), the Courts may impose a fine instead of, or in addition to, the imprisonment term. The conversion process is specified in subsection 4B(2) of the Crimes Act 1914 .
5.17 Correction of Part VI heading.
5.18 Under section 63 of the Banking Act, an ADI, except a foreign ADI, needs to seek prior approval from the Treasurer before entering into any agreement, arrangement, partnership or reconstruction of its business.
5.19 This amendment will remove the duplication between section 63 and the proposed Financial Sector (Transfers of Business) Act 1999 .
5.20 As well as applying the Criminal Code, this item enables the RBA to use the words 'bank', 'banker' and 'banking' in relation to its financial business without committing an offence against section 66 of the Banking Act.
5.21 This item requires APRA to give ASIC a copy of any notifications made under section 66 when it gives a consent for the use of certain business names or imposes conditions on a consent. ASIC is given a copy of the notice because of its role in registering company names.
Items 60 - 62
5.22 These items enable the Treasurer to declare a specified day to be a bank holiday for ADIs. On a bank holiday, ADIs are not compelled to make payments or do other acts that they would not be required to make or do on a Sunday with the obligation deemed to be transferred to the next business day.
5.23 The RBA is treated as an ADI for the purposes of banking holiday provisions.
Items 63 - 65, 67, 69 and 70
5.24 These items extend the unclaimed money provisions from banks to ADIs. As a consequence, ADIs will be required to deliver sums legally payable by them, where the time period for commencing proceedings for their recovery has elapsed (normally seven years) to the Commonwealth. Unclaimed moneys includes amounts in accounts held with an ADI that have not been activated for at least seven years.
Items 66, 68, 71 and 72
5.25 These items apply the Criminal Code to the unclaimed moneys provisions.
5.26 This item repeals the general offences provision in the Banking Act, as it is no longer necessary. In future, all offences will be contained within the relevant section or subsection.
5.27 This item repeals subsections 69(1) and (2) as these issues are covered by the Crimes Act 1914 . As a consequence, section 69C is redundant.
5.28 This item removes a reference to a subsection repealed by item 74.
5.29 This item will enable regulations on prudential matters to be made in relation to ADIs or NOHCs.
5.30 This item updates the heading for Schedule 1 of the Banking Act.