Second Reading SpeechMr Slipper (Parliamentary Secretary to the Minister for Finance and Administration)
That this bill be now read a second time.
I rise today to introduce the Financial Sector Legislation Amendment Bill (No. 2) 2002 that continues the legislation amendments to improve the efficiency and operation of a range of financial sector legislation.
Most of the amendments are minor and technical in nature. A number of amendments are aimed at improving the ability of the Australian Prudential Regulation Authority (APRA) to monitor the financial industry through improving administration.
The bill contains amendments to seven acts.
There are a large number of amendments to the Banking Act 1959 (Banking Act) largely reflecting that it has not been updated for some time. Amendments to the Banking Act include provision for the application of a `fit and proper' test to directors and senior managers of authorised deposit taking institutions (ADIs) and authorised non-operating holding companies (NOHCs). Currently, there is no formal test of expertise and integrity of directors and senior management. This amendment will make Australia compliant with the requirement for a `fit and proper' test as specified by the Basel committee which prescribes the international benchmark for banking regulation. This amendment will also reduce the risk exposure faced by depositors arising from mismanagement.
Further amendments to the Banking Act will make the provisions in the Banking Act which deal with auditors consistent with the auditor provisions in the Insurance Act 1973 (Insurance Act). The amendments will provide APRA with the means to remove auditors who fail to perform adequately and properly. This is essential for APRA to receive accurate information in carrying out its prudential regulation.
Amendments to the Banking Act also include the requirement for an authorised deposit taking institution, authorised non-operating holding companies of an ADI and their subsidiaries, to notify APRA immediately of any breaches of prudential requirements and any material adverse developments. This will enable APRA to more effectively monitor the position of potentially troubled organisations in order to seek earlier remedial action and will assist in protecting depositor interests. Given APRA's conglomerate policy framework, any remedial reporting actions will cover an ADI on a stand-alone basis and also on a conglomerate basis. Penalties have been specified for breaches of this requirement. It will also improve compliance with the Basel core principles dealing with regular banking supervision.
Another amendment to the Banking Act will allow APRA to apply prudential standards on a consolidated group basis. This is consistent with APRA's own conglomerate policy and also with the Basel core principles which require that supervision of a banking group be on a consolidated basis. Consultation with industry was undertaken by APRA.
The Banking Act will also be amended to provide additional grounds for APRA to revoke the authority granted to an ADI or non-operating holding company where the application for the authority contained false or misleading information. Currently APRA must rely on uncertain national interest provisions. This amendment will remove the uncertainty. This is also a requirement of the Basel core principles.
The final amendment to the Banking Act will correct a discrepancy between the indemnity provisions of the Banking Act and the Australian Prudential Regulation Authority Act 1998. The discrepancy relates to the extent of protection available to APRA officers under these acts and will ensure that Australia is in compliance with the Basel core principles which require that legal protection should be afforded to the supervisory agency and its staff against lawsuits when they have acted in good faith.
Amendments to the Insurance Act are required to allow APRA to discuss submissions, from a director or senior manager who is being removed, with third parties. This would mean that APRA can test the veracity of any material notwithstanding privacy or confidentiality concerns. This is a vital part of APRA's ability to apply the `fit and proper' test to management.
A further amendment under the Insurance Act is the requirement that an insurance company must notify APRA of any breach of prudential standards, including any material developments which are detrimental to its financial position. This will allow APRA to deal earlier with potentially troubled institutions.
Another amendment deals with the incorrect specification of penalties. The penalty provisions need to be increased so that the penalty units applying to a body corporate are appropriate and consistent with penalty provisions specified in the Crimes Act 1914 applying to bodies corporate.
Amendments to the Superannuation (Resolution of Complaints) Act 1993 (SRC Act) introduce flexibility in the time limits relating to complaints about disability benefits which acknowledge the difficulty in assessing medical conditions over time and which give the Superannuation Complaints Tribunal discretion in dealing with time limits which are currently fixed.
Another amendment to the SRC Act will act to strengthen, modernise and improve the conciliation powers of the Superannuation Complaints Tribunal. This will enable the tribunal to require parties to attend conciliation instead of the current voluntary system. There will also be penalties for non-compliance. These amendments will make the use of conciliation consistent with other administrative tribunals.
A further amendment to the SRC Act is required to remove redundant powers which deal with arbitration. There will also be further minor technical amendments which will have the effect of streamlining the application of the SRC Act.
Amendments to the Superannuation Industry (Supervision) Act 1993 will allow the recognition of awards, which are still in force, given under arbitration agreements, even though the arbitration power has been removed.
Amendments to the Australian Securities and Investments Commission Act 2001, the Corporations Act 2001 and the Corporations (Repeals, Consequentials and Transitionals) Act 2001 correct minor errors, grammatical mistakes and erroneous cross-references and remove obsolete provisions. The Ministerial Council for Corporations has been consulted about the amendments and has approved them.
This bill builds on the financial sector reforms already undertaken, and they emphasise the commitment to ongoing reforms which will ensure that Australia is at the forefront of international best practice in financial regulation.
The financial sector is a key driver in the economy. The benefits that these amendments will provide include increased efficiency of the financial industry and will improve the operation of the acts to assist the regulators in improving the regulatory environment. I commend the bill to the House and present the explanatory memorandum.
Debate (on motion by Mr Cox) adjourned.