Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Act 2018 (10 of 2018)
Schedule 1 Amendment of the Banking Act 1959
Part 1 Main amendments
Banking Act 1959
31 At the end of Division 1A of Part II
Add:
Subdivision B - Conversion and write-off provisions
11CAA Definitions
In this Subdivision:
clearing and settlement facility has the meaning given by Division 6 of Part 7.1 of the Corporations Act 2001.
conversion and write-off provisions means the provisions of the prudential standards that relate to the conversion or writing off of:
(a) Additional Tier 1 and Tier 2 capital; or
(b) any other instrument.
conversion entity : an entity (the first entity ) is a conversion entity for an instrumentif:
(a) the instrument is issued by another entity, or another entity is a party to the instrument; and
(b) the instrument converts, in accordance with the terms of the instrument, into one or more ordinary shares or mutual equity interests of the first entity.
converts : an instrument converts into one or more ordinary shares or mutual equity interests of an entity including by redeeming or cancelling the instrument or rights under the instrument, and replacing the instrument or rights with ordinary shares or mutual equity interests (as the case requires).
mutual equity interests has the same meaning as in the prudential standards.
operating rules has the meaning given by section 761A of the Corporations Act 2001.
related subsidiary of an ADI means a subsidiary of a holding company of the ADI.
specified law means any of the following:
(a) the Financial Sector (Shareholdings) Act 1998;
(b) the Foreign Acquisitions and Takeovers Act 1975;
(c) Chapter 6 of the Corporations Act 2001 (takeovers);
(d) any other Australian law, or law of a foreign country or part of a foreign country, prescribed by the regulations for the purposes of this paragraph.
11CAB Conversion and write-off provisions
Application
(1) This section applies in relation to an instrument that contains terms that are for the purposes of the conversion and write-off provisions and that is issued by, or to which any of the following is a party:
(a) an ADI;
(b) a holding company of an ADI;
(c) a subsidiary or related subsidiary of an ADI;
(d) an entity of a kind prescribed by the regulations for the purposes of this paragraph.
Conversion of instrument despite other laws etc.
(2) The instrument may be converted in accordance with the terms of the instrument despite:
(a) any Australian law or any law of a foreign country or a part of a foreign country, other than a specified law; and
(b) the constitution of any of the following entities (the relevant entity ):
(i) the entity issuing the instrument;
(ii) any entity that is a party to the instrument;
(iii) any conversion entity for the instrument; and
(c) any contract or arrangement to which a relevant entity is a party; and
(d) any listing rules or operating rules of a financial market in whose official list a relevant entity is included; and
(e) any operating rules of a clearing and settlement facility through which the instrument is traded.
Write-off of instrument despite other laws etc.
(3) The instrument may be written off in accordance with the terms of the instrument despite:
(a) any Australian law or any law of a foreign country or a part of a foreign country; and
(b) the constitution of either of the following entities (the relevant entity ):
(i) the entity issuing the instrument;
(ii) any entity that is a party to the instrument; and
(c) any contract or arrangement to which a relevant entity is a party; and
(d) any listing rules or operating rules of a financial market in whose official list a relevant entity is included; and
(e) any operating rules of a clearing and settlement facility through which the instrument is traded.
11CAC Conversion or write-off etc. not grounds for denial of obligations
(1) This section applies if an entity (the first entity ) is party to a contract, whether the proper law of the contract is:
(a) Australian law (including the law of a State or Territory); or
(b) law of a foreign country (including the law of part of a foreign country).
(2) None of the matters mentioned in subsection (3) allows the contract, or a party to the contract (other than the first entity), to do any of the following:
(a) deny any obligation under the contract;
(b) accelerate any debt under the contract;
(c) close out any transaction relating to the contract;
(d) enforce any security under the contract.
(3) The matters are as follows:
(a) a relevant instrument being converted in accordance with the terms of the instrument;
(b) a relevant instrument being written off in accordance with the terms of the instrument;
(c) the making of a determination (however described) by APRA that results in a relevant instrument being required to be converted or written off in accordance with the terms of the instrument.
(4) In this section:
relevant instrument means:
(a) an instrument to which section 11CAB applies:
(i) that is issued by the first entity; or
(ii) to which the first entity is a party; or
(iii) for which the first entity is a conversion entity; or
(b) if the first entity is a body corporate that is a member of a relevant group of bodies corporate - an instrument to which section 11CAB applies:
(i) that is issued by another member of the group; or
(ii) to which another member of the group is a party; or
(iii) for which another member of the group is a conversion entity.