Overview

Banking exemption No. 2 of 2015 (2016 Exemption) was enacted under the Banking Act 1959 to address a gap in the regulation of certain funds engaged in banking activities for religious and charitable purposes. The 2016 Exemption continues the exemption granted by the 2015 Exemption to Religious Charitable Development Funds (RCDFs) from the prohibitions in sections 7 and 8 of the Banking Act for a further 12 months, provided that the RCDFs comply with the specified conditions. The Australian Prudential Regulation Authority (APRA) has determined that these funds, which traditionally fall within the definition of 'banking business', can operate under the same conditions as those specified in the 2015 Exemption. The purpose of this exemption is to allow RCDFs to continue their operations without needing to be authorised under the Banking Act, while ensuring compliance with certain conditions. APRA has assessed this legislative instrument and concluded that it is compatible with human rights as it does not engage any of the applicable rights or freedoms recognised in the international instruments listed in the Human Rights (Parliamentary Scrutiny) Act 2011.

Scope and Application

Banking exemption No. 2 of 2015 applies to Religious Charitable Development Funds (RCDFs) listed in the 2015 Exemption, which are funds established to borrow and use money for religious and charitable purposes, operating on a not-for-profit basis. The exemption applies across Australia, as it is issued under the Commonwealth's Banking Act 1959. The 2016 Exemption extends the previous exemption for these funds, allowing them to continue their activities without being subject to the prohibitions in sections 7 and 8 of the Banking Act, provided they comply with the specified conditions. The exemption is intended to last for another 12 months from the expiration of the 2015 Exemption, ending on 31 December 2016. This legislative instrument ensures that the RCDFs can continue to conduct their financial activities without legal hindrance, while also maintaining compliance with the stipulated conditions.

Key Provisions

The Banking exemption No. 2 of 2015, as outlined in the explanatory statement, allows the Australian Prudential Regulation Authority (APRA) to exempt certain funds from the prohibitions on carrying on banking business as outlined in sections 7 and 8 of the Banking Act 1959 (Banking Act). Specifically, under section 11(1) of the Banking Act, APRA can determine in writing that certain provisions of the Act do not apply to certain persons, including Religious Charitable Development Funds (RCDFs), for a specified period. This particular exemption extends the 2015 Exemption for a further 12 months, until 31 December 2016, for those RCDFs listed in the 2015 Exemption, provided they adhere to the conditions specified in the Schedules of both the 2015 and 2016 Exemptions. The obligations imposed by this legislation on the affected parties primarily involve compliance with the conditions set forth in Schedules 2 of both the 2015 and 2016 Exemptions. These conditions are intended to ensure that the activities of RCDFs remain aligned with their religious and charitable purposes and do not stray into areas that would require formal authorisation under the Banking Act. RCDFs must ensure that their financial products, advertising, and marketing comply with the regulatory requirements outlined in these schedules. APRA retains the authority to monitor and review these funds to ensure ongoing compliance, and failure to meet the conditions could result in the exemption being revoked. In terms of penalties and consequences, the Banking Act itself provides that it is an offence for a person who is not a body corporate to carry on banking business in Australia without an applicable exemption, as well as for a body corporate to do the same if it is not an authorised deposit-taking institution or the Reserve Bank. While the Banking Act does not specify the penalties for these offences, they are likely to include fines and/or imprisonment. However, the specific penalties would be determined by the courts, taking into account the nature and circumstances of the offence. The 2016 Exemption does not alter these penalties but ensures that those RCDFs listed in the exemption can continue their operations without legal repercussions, provided they adhere to the specified conditions. Additionally, APRA has assessed the compatibility of this legislative instrument with human rights as per the Human Rights (Parliamentary Scrutiny) Act 2011. The Statement of Compatibility confirms that the exemption does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of that Act. Therefore, APRA concludes that the exemption is compatible with human rights, provided the RCDFs continue to operate within the bounds of the specified conditions. This assessment ensures that the exemption does not conflict with any international human rights obligations.