Banking exemption No. 2 of 2014

Administered by Department of the Treasury

Legislation au F2014L01401 Not in force Legislative Instrument

Legislation content

Banking exemption No. 2 of 2014

Banking exemption No. 3 of 2014

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Banking Act 1959, subsections 11(1) and 11(4)

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) of the Act do not apply to a person while the determination is in force. Under paragraph 11(2)(c) of the Act such a determination may be made subject to specified conditions. Under subsection 11(4) of the Act, APRA may, in writing, vary or revoke a determination made under subsection 11(1).

Banking exemption No. 2 of 2014 (Determination No. 1) revokes Banking exemption No. 1 of 2014 which was made on 13 June 2014 (the old exemption). Banking exemption No. 3 of 2014 (Determination No. 2) makes a new exemption under subsection 11(1) of the Act and is in substantially the same terms as the old exemption except that it adds an extra entity to the list of entities exempted under subsection 11(1). Determinations Nos. 1 and 2 will come into force on the day that they are registered on the Federal Register of Legislative Instruments (FRLI).

1. Background

Subsection 7(1) of the Act prohibits a person from carrying on banking business in Australia if the person is not a body corporate and there is no determination in force under section 11 of the Act that subsection 7(1) does not apply to the person. Subsection 8(1) of the Act prohibits a body corporate (other than the Reserve Bank of Australia) from carrying on banking business in Australia if the body corporate is not authorised by APRA to do so and there is no determination in force under section 11 of the Act that subsection 8(1) does not apply to the body corporate (the prohibitions in subsections 7(1) and 8(1) of the Act are collectively referred to in this Explanatory Statement as the prohibition).

The old exemption exempted from the prohibition the charitable development funds (Funds) listed in the Schedule attached to the old exemption titled ‘the class of persons to whom this determination applies’. The old exemption was made subject to the conditions specified in the ‘Schedule of conditions’ also attached to the old exemption (the conditions).

APRA has received an application from National Spiritual Assembly of the Baha’is of Australia Incorporated (NSABAI) for the Baha’i Investment Fund (BIF) to be exempted from the prohibition. APRA considers that this body meets all of the conditions. Further APRA has determined that this body should be exempt from the prohibition subject to the conditions.

2. Purpose of the instruments

The purpose of Determinations Nos. 1 and 2 is to revoke the old exemption and to make a new exemption in substantially the same terms as the old exemption, subject to the conditions, but adding BIF to the list of exempted Funds.

3. Consultation

APRA has consulted with NSABAI and with the Office of Best Practice Regulation (OBPR).

No further consultation was carried out by APRA in relation to Determinations Nos. 1 and 2 due to their minor and machinery purpose and because no costs are expected to be incurred by any organisation covered by these Determinations. NSABAI applied to APRA for an exemption from the prohibition under subsection 11(1) of the Act and NSABAI is the only entity directly affected by Determinations Nos. 1 and 2.

The OBPR confirmed that no further regulatory analysis in the form of a regulatory impact statement is required due to the minor and machinery nature of Determinations Nos. 1 and 2.

4. 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 exemptions Nos. 2 and 3 of 2014

These Legislative Instruments are 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

Subsection 7(1) of the Banking Act 1959 (the Act) prohibits a person from carrying on banking business in Australia if the person is not a body corporate and there is no determination in force under section 11 of the Act that subsection 7(1) does not apply to the person. Subsection 8(1) of the Act prohibits a body corporate (other than the Reserve Bank of Australia) from carrying on banking business in Australia if the body corporate is not authorised by APRA to do so and there is no determination in force under section 11 of the Act that subsection 8(1) does not apply to the body corporate.

Banking exemption No. 3 of 2014 (the new exemption) determines that sections 7 and 8 of the Banking Act do not apply to the funds listed in the schedule attached to the new exemption titled ‘the class of persons to whom this determination applies’, including the Baha’i Investment Fund. The new exemption is subject to the conditions set out in the ‘Schedule of conditions’ attached to the new exemption.

Baha’i Investment Fund is a Religious Charitable Development Fund. Religious Charitable Development Funds are funds formed for religious and charitable purposes and operated on a not-for-profit basis.

Banking exemption No. 2 of 2014 revokes an earlier exemption, made under section 11 of the Banking Act, which is being replaced by the new exemption.

Human rights implications

APRA has assessed these Legislative Instruments and is of the view that they do 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 instruments are compatible with human rights.

Conclusion

These Legislative Instruments are compatible with human rights as they do not raise any human rights issues.

Overview

The Banking Act 1959 was enacted by the Australian Parliament to regulate the banking industry and safeguard the financial stability of Australia's banking sector. It introduced comprehensive provisions to govern banking activities, including prohibiting unauthorised entities from conducting banking business in Australia. The 2014 exemptions, specifically Banking exemption No. 2 of 2014 and Banking exemption No. 3 of 2014, were introduced by the Australian Prudential Regulation Authority (APRA) to address a gap identified in the application of the Act's prohibitions to certain charitable development funds. The primary policy objective behind these exemptions was to ensure that specific religious charitable development funds could operate without contravening the prohibitions on unauthorised banking business, provided they met certain specified conditions. These exemptions were made in response to applications from relevant entities seeking clarification and permission to conduct certain banking activities within the bounds of the Act, while ensuring compliance with the overarching regulatory framework designed to protect the integrity of the banking system.

Scope and Application

The Banking exemption Nos. 2 and 3 of 2014, issued under the Banking Act 1959, pertain to the exemption of certain entities from specific prohibitions on carrying on banking business in Australia. Banking exemption No. 2 of 2014 revokes a previous exemption made on 13 June 2014, while Banking exemption No. 3 of 2014 introduces a new exemption. Both exemptions apply to charitable development funds, specifically listed in the attached schedules, and are subject to conditions outlined in the respective 'Schedule of conditions'. The new exemption includes the Baha’i Investment Fund, a religious charitable development fund, which is now exempt from the prohibitions on banking business as outlined in subsections 7(1) and 8(1) of the Banking Act 1959. These instruments apply to entities within the Commonwealth of Australia and are administered by the Australian Prudential Regulation Authority (APRA), which has the power to make, vary, or revoke such determinations under subsection 11(1) and 11(4) of the Act. The exemptions do not extend to any entities beyond those specified in the schedules and are not applicable to any other conduct or transactions outside the scope of the Banking Act 1959.

Key Provisions

The main operative sections of the Banking exemption Nos. 2 and 3 of 2014 (the 'Exemptions') are found in subsections 11(1) and 11(4) of the Banking Act 1959 (the 'Act'). Subsection 11(1) allows the Australian Prudential Regulation Authority (APRA) to determine, in writing, that certain provisions of the Act do not apply to a person while the determination is in force, and this determination can be made subject to specified conditions. Subsection 11(4) allows APRA to vary or revoke a determination made under subsection 11(1). Banking exemption No. 2 of 2014 revokes the previous exemption, while Banking exemption No. 3 of 2014 creates a new exemption that is in substantially the same terms as the old exemption, but with the addition of the Baha’i Investment Fund to the list of exempted funds. These exemptions impose obligations on the entities covered by them. Specifically, the entities must adhere to the conditions outlined in the 'Schedule of conditions' attached to the new exemption. These conditions likely pertain to the operation and governance of the funds to ensure they maintain their not-for-profit and charitable status. APRA has assessed that the National Spiritual Assembly of the Baha’is of Australia Incorporated (NSABAI) meets these conditions for the Baha’i Investment Fund (BIF) to be exempted from the prohibitions under the Act. Breach of the conditions set out in the exemptions could lead to various consequences. While the Act itself does not specify particular offences or penalties for non-compliance with the conditions, APRA may take regulatory action against the exempted entities if they fail to meet these conditions. Such actions could include revoking the exemption, imposing fines, or taking other enforcement measures. The severity of these consequences would depend on the nature and extent of the breach, as well as the specific terms of the conditions. In summary, the new exemptions provide a legal framework for certain funds to operate outside the strict regulatory scope of the Banking Act, provided they adhere to the specified conditions. These conditions are intended to ensure the funds remain true to their charitable and religious purposes. Failure to comply with these conditions could result in the withdrawal of the exemption, potentially subjecting the entities to the full regulatory requirements of the Act.

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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.