Authority to carry on banking business 2024 – Avenue Bank Ltd
Banking Act 1959
To: Avenue Bank Ltd ABN 24 628 073 085 (the body corporate) SINCE
- On 7 September 2021 APRA:
(i) under subsection 9(3) of the Banking Act 1959 (the Act), granted the body corporate authority to carry on banking business in Australia for a limited time (the Authority); and
(ii) under paragraph 9AA(1)(a) of the Act, imposed conditions on the Authority (the Authority Conditions);
B. On 14 August 2023, the Authority was varied to change the expiry date of the Authority to 7 March 2024; and
C. The body corporate has applied in writing to APRA:
(i) under subsection 9(2) of the Act, for an authority to carry on banking business in Australia that is not subject to a time limit; and
(ii) for the Authority Conditions to be revoked, I, Renée Roberts, a delegate of APRA:
(a) under subsection 9D(6) of the Act, VARY the Authority to remove the time limit that applies to the Authority;
(b) under paragraph 9AA(1)(b) of the Act, REVOKE the Authority Conditions; and
(c) under paragraph 9AA(1)(a) of the Act, IMPOSE on the authority the conditions specified in the Schedule.
This instrument commences on the day it is made. Dated: 21 February 2024
Renée Roberts Executive Director Banking Division
Interpretation
In this instrument:
APRA means the Australian Prudential Regulation Authority.
banking business has the meaning given in subsection 5(1) of the Act.
Notes
APRA is required to publish this instrument in the Gazette, and may also publish this instrument in any other way that APRA considers appropriate.
Schedule – the conditions imposed on the Authority
- The body corporate must consult with, and receive written agreement from, APRA prior to offering any products other than products approved in APRA’s letter to the body corporate dated 21 February 2024.
2. The body corporate must, prior to the issuance of Common Equity Tier 1 (CET1) Capital instruments by any member of the Level 2 group to which the body corporate belongs and as soon as practicable:
a) consult with APRA;
b) provide APRA with complete information associated with the proposed issue to allow APRA to assess the eligibility of the instruments for inclusion as CET1 Capital in the body corporate’s or NOHC’s Regulatory Capital, including:
- all regulatory and marketing documentation;
ii. any other information necessary for APRA to assess the eligibility of the instruments, including information requested by APRA;
iii. a statement of compliance of the capital instruments signed by a senior manager of the body corporate or NOHC issuer or, if issued by a non- APRA regulated member of the Level 2 group, a senior manager of the body corporate or NOHC with group responsibility, which must:
- address how the issuer is satisfied that each required capital eligibility criterion set out in Prudential Standard APS 111 Capital Adequacy: Measurement of Capital is met and will continue to be met in the future; and
B. clearly set out references to supporting documents and opinions that demonstrate that the criteria are met.
Interpretation
In this schedule:
body corporate means Avenue Bank Ltd ABN 24 628 073 085.
Level 2 has the meaning given in Prudential Standard APS 001 Definitions.
NOHC means Avenue Hold Limited ABN 50 628 071 198.
senior manager has the meaning given in Prudential Standard APS 001 Definitions.
Unless the contrary intention appears, a reference in this schedule to a Prudential Standard is a reference to the Prudential Standard as in force from time to time.
Overview
The Authority to carry on banking business 2024, enacted on 21 February 2024, pertains to Avenue Bank Ltd and amends the Banking Act 1959. This legislation was introduced to address the need for a permanent banking authority for Avenue Bank Ltd, previously limited to a specific timeframe. The Australian Prudential Regulation Authority (APRA) is the enacting body responsible for regulating the banking sector in Australia. The primary policy objective of this Act is to ensure that Avenue Bank Ltd adheres to stringent regulatory standards, thereby maintaining financial stability and protecting consumers. By revoking the time-limited authority and imposing new conditions, the Act aims to provide a more enduring framework for the bank's operations while ensuring compliance with APRA's regulatory requirements.
Scope and Application
The Authority to carry on banking business 2024, issued under the Banking Act 1959, applies specifically to Avenue Bank Ltd, a body corporate with ABN 24 628 073 085. This legislation was enacted by the Australian Prudential Regulation Authority (APRA) and pertains to the authority granted to Avenue Bank Ltd to conduct banking business in Australia. The Authority, initially granted on 7 September 2021, was varied on 14 August 2023 to alter the expiry date to 7 March 2024. Subsequently, Avenue Bank Ltd applied for an indefinite banking authority and requested the revocation of certain conditions imposed on its existing authority. As a result, APRA has varied the Authority to remove its time limit and imposed new conditions specified in the Schedule. This Act extends to the Commonwealth of Australia and encompasses specific banking operations conducted by Avenue Bank Ltd, subject to the terms and conditions outlined. The conditions imposed include mandatory consultation with APRA and obtaining written agreement before offering products other than those approved in a specified letter, as well as the requirement to provide comprehensive information to APRA before issuing Common Equity Tier 1 (CET1) Capital instruments. These conditions are intended to ensure that Avenue Bank Ltd complies with regulatory standards and maintains adequate capital adequacy as per Prudential Standards.
Key Provisions
The Authority to Carry on Banking Business 2024 – Avenue Bank Ltd (the instrument) modifies the authority that the Australian Prudential Regulation Authority (APRA) had previously granted to Avenue Bank Ltd (ABN 24 628 073 085) to carry on banking business in Australia. The original authority, issued on 7 September 2021, was subject to specific conditions (subsection 9(3) and 9AA(1)(a) of the Banking Act 1959). On 14 August 2023, APRA altered this authority to change its expiry date to 7 March 2024. Avenue Bank Ltd has applied for a permanent banking authority and requested the removal of the conditions previously imposed. Consequently, this instrument revokes the previous conditions and imposes new conditions on the Authority as outlined in the Schedule.
The obligations imposed on Avenue Bank Ltd are primarily centered around consultation and reporting requirements with APRA. Firstly, the bank must consult with and receive written agreement from APRA before offering any products that are not approved in APRA’s letter dated 21 February 2024 (Schedule, Clause 1). Secondly, prior to the issuance of Common Equity Tier 1 (CET1) Capital instruments by any member of the Level 2 group to which the bank belongs, the bank must consult with APRA and provide comprehensive information to facilitate APRA’s assessment of the instruments’ eligibility for inclusion as CET1 Capital (Schedule, Clause 2). This information must include all regulatory and marketing documentation, any additional information requested by APRA, and a statement signed by a senior manager that demonstrates compliance with the capital eligibility criteria set out in Prudential Standard APS 111.
Failure to comply with the conditions imposed by this instrument could result in serious consequences. Although the instrument does not explicitly detail penalties for non-compliance, breaches of the Banking Act 1959 generally may attract penalties under the Act or other relevant legislation. For instance, subsection 12AH(1) of the Banking Act 1959 provides that a person who contravenes certain provisions of the Act, including those related to the authority to carry on banking business, is liable for a penalty. The penalty for a corporation can be significant, up to the greater of three times the benefit obtained by the corporation from the contravention, $210,000, or three times the value of the transaction or series of transactions that gave rise to the contravention. In addition to financial penalties, non-compliance may lead to the revocation of the banking authority, thereby preventing the bank from continuing to operate in Australia.