Banking exemption No. 1 of 2016
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Banking Act 1959, section 11
Under subsection 11(1) of the Banking Act 1959 (the Act), APRA may, in writing, determine that any or all of the provisions of the Act referred to in paragraphs 11(1)(a) to (e) do not apply to a person while the determination is in force.
On 31 August 2016, APRA made Banking exemption No. 1 of 2016 (the instrument), which replaces Banking exemption No. 2 of 2015 (2016 Exemption).
The instrument commences on 1 January 2017.
- Background
Under section 7 of the 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 Act that section 7 does not apply to the person. Under section 8 of the 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 Act that section 8 does not apply to the body corporate.
The 2016 Exemption determined that the persons administering the RCDFs listed in Schedule 1 of that determination are exempt from the prohibitions in sections 7 and 8 of the Act from 1 January 2016 until 31 December 2016, provided that they comply with the conditions specified in Schedule 2 of that determination.
The 2016 Exemption will expire on 31 December 2016. The instrument continues the exemption in relation to RCDFs, but with revised conditions. APRA has consulted extensively on these conditions, commencing in 2013.
RCDFs 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 Act, such entities have historically been exempt from the need to be authorised under the Act. The instrument is intended to allow RCDFs to continue to operate but under a new set of conditions that seek to reduce the likelihood that an investor in an RCDF might confuse such an investment with a deposit. These new conditions include:
- retail products offered to retail investors to have a minimum term or call period of 31 days;
- RCDFs will be allowed to release funds early where exceptional circumstances exist that warrant the early release;
- certain transactional banking facilities such as Electronic Funds Transfer at Point of Sale (EFTPOS), BPAY facilities and Automatic Teller Machine (ATM) facilities must not be offered to retail investors; and
- restrictions on use of certain words and expressions including ‘at-call’ and ‘deposit’.
2. Purpose and operation of the instrument
The purpose of the instrument is to continue to exempt the administrators of RCDFs from the prohibitions in sections 7 and 8 of the Act.
3. Consultation
APRA has consulted extensively on the new conditions. Consultation commenced in 2013, and APRA issued a final Response to Submissions paper in March 2016.
4. Regulation Impact Statement
The Office of Best Practice Regulation has advised that a Regulation Impact Statement is 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 2016
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.