Banking (consent to assume or use restricted word or expression) No. 1 of 2015

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Banking Act 1959, paragraphs 66(2)(c) and 66(1)(d)

Acts Interpretation Act 1901, section 33

Subsection 66(1) of the Banking Act 1959 (the Act) prohibits a person who carries on a financial business, whether or not in Australia, from assuming or using in Australia a restricted word or expression in relation to that financial business without APRA’s consent. Subsection 33(3) of the Acts Interpretation Act 1901 confers power to revoke an instrument made under an enactment.

This Explanatory Statement relates to Banking (consent to assume or use restricted word or expression) No. 1 of 2015 (2015 Consent), which:

• revokes the Consent to Use Restricted Expressions – Class Consent: Building Societies and Credit Unions and Trustees of Superannuation Entities made by APRA on 19 May 2000 (2000 Consent), which allowed building societies, credit unions, and trustees of superannuation entities to use certain restricted words or expression in the circumstances, and subject to the conditions, specified in the consent; and
• makes a new class consent to building societies, credit unions, related bodies corporate of a building society or credit union, and certain trustees of superannuation entities to use the restricted words and expressions specified in the consent, subject to the conditions specified in the consent.

The 2015 Consent commences on the day that it is registered on the Federal Register of Legislative Instruments.

1.                Background

Under section 66 of the Act, the use of the following terms is restricted:

• ‘bank’, ‘banker’ and ‘banking’;

• ‘building society’, ‘credit union’ and ‘credit society’;

• terms that have been specified in a determination in force under subsection 66(5), such as ‘credit co-operative’; and
• any other word or expression that is of like import to any of these terms.

The 2015 Consent updates the 2000 consent, setting out where specified restricted terms may be used by certain classes of entities and the conditions applying to the use of those terms.

2.                   Purpose of the amending instrument

The purpose of the 2015 Consent is to revoke the existing 2000 Consent made on 19 May 2000 and replace it with the new consent.

The 2000 Consent permitted the use of the restricted words or expressions ‘banking’, ‘building society’, ‘credit union’, credit society’ or ‘credit co-operative’ by a building society or credit union, or a related body corporate of either, in relation to the financial business of the building society or credit union, as relevant.  The 2000 Consent also permitted the trustee of a superannuation entity whose members are current or former officers or employees of an authorised deposit taking institution (ADI) to use the name of the ADI in the name of the trustee or superannuation entity despite the fact that the ADI’s name contains the restricted word or expression ‘bank’, ‘banker’, ‘banking’, ‘credit union, ‘credit society’ or ‘credit co-operative’. 

The 2015 Consent continues to permit these uses and, additionally, permits a credit union or building society, or a related body corporate of either, to use the word or expression ‘banker’ or ‘mutual banking’ (where applicable) in relation to the financial business of the building society or credit union, as relevant. 

The 2015 Consent allows a credit union or building society to use the words ‘banker’ or ‘banking’ only in marketing and branding material to describe its banking activities, but not as part of a registered corporate, business or trading name or as part of an internet domain name.

3. Consultation

APRA consulted on proposed changes to the Guidelines on Implementation of section 66 of the Banking Act 1959 (the Guidelines) released in April 2013. Comments received in submissions were considered in finalising APRA’s revised Section 66 Guidelines. The Consent reflects changes made to those guidelines applicable to credit unions, building societies and trustees of superannuation entities.

The Customer Owned Banking Association (COBA) has expressed the view that the specification in the revised guidelines that ‘banking’ may not be used as part of a registered corporate, business or trading name or as part of an internet domain name by a credit union or building society is a change in policy. In making the 2015 Consent, APRA has sought to clarify, rather than alter, the limits on the use of this term by aligning the formal instrument of consent with the policy applied by APRA.

The existing Section 66 guidelines specify that banks have been given unrestricted consent to use the terms ‘bank’, banker’ and ‘banking’. Credit unions and building societies are restricted to using the term ‘banking’ in relation to their banking activities. COBA argues that, as all authorised deposit-taking institutions (ADIs) conduct banking business, all ADIs should be able to use the term ‘banking’ in registered corporate, business or trading names or as part of an internet domain name. The restriction ensures that smaller ADIs do not present themselves as banks. While all ADIs conduct banking business not all are banks.

4.                   Regulation Impact Statement

A Preliminary Assessment was submitted the Office of Best Practice Regulation who confirmed that a Regulation Impact Statement was not required.

5. Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.

Attachment A

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Banking (consent to assume or use restricted word or expression) No. 1 of 2015

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instruments

Banking (consent to assume or use restricted word or expression) No. 1 of 2015 revokes the existing Consent to Use Restricted Expressions – Class Consent: Building Societies and Credit Unions and Trustees of Superannuation Entities made on 19 May 2000 and replaces it with a new consent. The new consent allows credit unions and building societies (and their related bodies corporate) and trustees of certain superannuation entities to use certain words and expressions that are restricted under the Banking Act 1959, such as ‘banker’, ‘banking’, ‘building society’ and ‘credit union’.

Human rights implications

APRA has assessed this Legislative Instrument and is of the view that it does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.  Accordingly, in APRA’s assessment, the instrument is compatible with human rights.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.