Banking exemption No. 1 of 2014

Administered by Department of the Treasury

Legislation au F2014L00793 Not in force Legislative Instrument

Legislation content

Banking exemption No. 1 of 2014

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Banking Act 1959, section 11

Under subsection 11(1) of the Banking Act 1959 (Banking Act), APRA may, in writing, determine that any or all of the provisions of the Banking Act referred to in paragraphs 11(1)(a) to (e) do not apply to a person while the determination is in force. Under subsection 11(4) of the Banking Act, APRA may, in writing, vary or revoke a determination made under subsection 11(1).

 

Banking exemption No.1 of 2014 (2014 Exemption) is a new determination and will come into force on 1 July 2014.

 

  1.    Background

Under section 7 of the Banking Act, it is an offence for a person who is not a body corporate to carry on banking business in Australia, except where there is a determination in force under section 11 of the Banking Act that section 7 does not apply to the person.  Under section 8 of the Banking Act, it is an offence for a body corporate to carry on banking business in Australia if the body corporate is not an authorised deposit-taking institution or the Reserve Bank, except where there is a determination in force under section 11 of the Banking Act that section 8 does not apply to the body corporate. 

 

Banking exemption No. 1 of 2013 (2013 Exemption) determined that the Religious Charitable Development Funds listed in Schedule 1 of that determination are exempt from the prohibitions in section 7 and 8 of the Banking Act, provided that they comply with the conditions specified in Schedule 2 of that determination. The 2013 Exemption will expire on 30 June 2014.

 

Religious Charitable Development Funds are funds that have been set up to borrow and use money for religious and charitable purposes. While the business of such entities has traditionally fallen within the definition of ‘banking business’ under the Banking Act, such entities have historically been exempt from the need to be authorised under the Banking Act. The 2014 Exemption is intended to allow Religious Charitable Development Funds to operate under the same conditions as those currently attaching to the 2013 Exemption. APRA is currently reviewing the operation and conditions of the exemption and expects to make a decision on the future operation of the exemption by 31 December 2014.

2.      Purpose and operation of the instrument

The purpose of the 2014 Exemption is to continue to exempt those Funds, as applicable, listed in the 2013 Exemption from the prohibitions in section 7 and 8 of the Banking Act for a further period of six months.

 

3.      Consultation

APRA has advised the Religious Charitable Development Funds that they will continue to be exempt from the prohibitions in section 7 and 8 of the Banking Act until 31 December 2014. APRA will further consult with the Funds on a number of proposals as to the future operation of the exemption. APRA expects to make a decision on the future operation of the order prior to its expiry on 31 December 2014.

 

4.  Regulation Impact Statement

The Office of Best Practice Regulation has advised that a Regulation Impact Statement is not required for this legislative instrument.

 

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 exemption No. 1 of 2014

 

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 Instrument

 

Under section 7 of the Banking Act 1959 (Banking Act), it is an offence for a person who is not a body corporate to carry on banking business in Australia except where there is a determination in force that section 7 does not apply to the person.  Under section 8 of the Banking Act, it is an offence for a body corporate to carry on banking business in Australia if the body corporate is not an authorised deposit-taking institution or the Reserve Bank, except where there is a determination in force that section 8 does not apply to the body corporate. 

This Legislative Instrument determines that sections 7 and 8 of the Banking Act do not apply to Religious Charitable Development Funds, subject to conditions relating to the facilities offered in connection with the financial products, and any advertising or marketing in connection with the financial products.  Religious Charitable Development Funds are funds formed for religious and charitable purposes and operated on a not-for-profit basis.

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.

 

Overview

The Banking exemption No. 1 of 2014 was enacted to continue exempting certain Religious Charitable Development Funds from the prohibitions set out in sections 7 and 8 of the Banking Act 1959. These funds, which are established for religious and charitable purposes and operate on a not-for-profit basis, have historically been exempt from the need to be authorised under the Banking Act, even though their activities fall within the definition of 'banking business'. The exemption was introduced to provide a seamless transition and continuity for these funds while the Australian Prudential Regulation Authority (APRA) reviews the operation and conditions of the exemption. The 2014 Exemption extends the exemption for six months from the expiry of the 2013 Exemption, providing a temporary measure until APRA makes a decision on the future operation of the exemption by 31 December 2014. This legislative instrument was developed by APRA and is compatible with human rights, as it does not engage any of the rights or freedoms recognised in the relevant international instruments.

Scope and Application

Banking exemption No. 1 of 2014, issued by the Australian Prudential Regulation Authority (APRA), applies specifically to Religious Charitable Development Funds listed in the 2013 Exemption, ensuring they remain exempt from the prohibitions outlined in sections 7 and 8 of the Banking Act 1959. This exemption allows these funds to continue operating without authorisation under the Banking Act, provided they comply with specified conditions relating to financial products, facilities, and marketing. The exemption is effective for a six-month period from 1 July 2014, extending until 31 December 2014, after which APRA will review and decide on its future operation. This instrument applies nationally across Australia, impacting entities involved in religious and charitable activities who engage in borrowing and using money for these purposes. APRA is also committed to further consulting with the Religious Charitable Development Funds on future exemption conditions and is expected to make a decision on the exemption's continuation before its expiry date.

Key Provisions

The Banking exemption No. 1 of 2014 (2014 Exemption) allows the Australian Prudential Regulation Authority (APRA) to exempt certain Religious Charitable Development Funds from specific provisions of the Banking Act 1959 (Banking Act) (s 11). This determination, effective from 1 July 2014, continues the exemption provided by the Banking exemption No. 1 of 2013 (2013 Exemption), which is set to expire on 30 June 2014. The 2014 Exemption ensures that these funds, which operate on a not-for-profit basis for religious and charitable purposes, are not subject to the prohibitions in sections 7 and 8 of the Banking Act, provided they comply with the specified conditions (s 7, s 8). These funds are traditionally involved in borrowing and using money for their purposes, activities that fall under the definition of 'banking business'. The 2014 Exemption aims to maintain the status quo until a decision on the future operation of the exemption is made by 31 December 2014. Entities covered by the 2014 Exemption must adhere to the conditions outlined in Schedule 2 of the 2013 Exemption, which detail the facilities and marketing restrictions applicable to the financial products offered by these funds. These conditions are designed to ensure that the operations of the Religious Charitable Development Funds remain aligned with their charitable objectives and do not inadvertently engage in activities that would require authorisation under the Banking Act. The compliance with these conditions is critical to maintaining the exemption from the prohibitions in sections 7 and 8 of the Banking Act. Failure to comply with the conditions set out in the 2014 Exemption could result in the exemption being revoked, thereby subjecting the Religious Charitable Development Funds to the prohibitions in sections 7 and 8 of the Banking Act. Section 7 makes it an offence for individuals who are not bodies corporate to carry on banking business in Australia without a relevant determination in force, while section 8 prohibits bodies corporate from conducting banking business unless they are authorised deposit-taking institutions or the Reserve Bank. The maximum penalties for these offences are not specified in the Banking Act but could include fines and imprisonment, depending on the severity of the breach and the discretion of the court. APRA retains the authority to vary or revoke the 2014 Exemption if it determines that compliance with the conditions is not being maintained or if new circumstances warrant such action (s 11(4)).

Legal classification tags

Area of Law
Banking Law
Financial Regulation
Instrument
Regulation
Concepts
Definitions & Interpretation
Licensing & Registration
Offence Provisions
Catchwords
Religious Charitable Development Funds
Human Rights (Parliamentary Scrutiny) Act 2011

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.