Banking exemption No 3 of 2011
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Banking Act 1959, subsection 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) do not apply to a person while the determination is in force. Under subsection 11(4) of the Act, APRA may, in writing, vary or revoke a determination made under section 11.
Banking exemption No. 3 of 2011 (Determination No. 3) varies Banking exemption No. 1 of 2011 (Determination No. 1). Determination No. 3 will come into force on the day that it is registered on the Federal Register of Legislative Instruments (FRLI).
- Background
Sections 7 and 8 of the Act prohibit a person or a body corporate from carrying on banking business in Australia unless authorised by APRA to do so (the prohibition).
Determination No. 1 determined that the charitable development funds (Funds) listed in Schedule 1 of Determination No. 1 are exempt from the prohibition provided that they comply with the conditions specified in Schedule 2 of Determination No. 1.
Determination No. 1 was amended on 3 August 2011 by Banking exemption No. 2 of 2011. The purpose of the amendment was to add a fund and to reflect the change in the names of 3 other funds in the list of Funds in Schedule 1 of Determination No. 1.
APRA has received an application from Temple Society Australia for this body to be exempted from the prohibition. APRA considers that this body meets all of the conditions set out in Schedule 2 of Determination No. 1, is a body which Determination No. 1 was designed to capture and should therefore be exempt from the prohibition on the conditions set out in Schedule 2.
2. Purpose of the instrument
The purpose of Determination No. 3 is to further vary Determination No. 1 by adding the name of Temple Society Australia to the list of Funds in Schedule 1 of Determination No. 1.
3. Consultation
APRA has consulted with the individual fund affected by Determination No. 3 and the Office of Best Practice Regulation (OBPR). 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 this extension.
Overview
The Banking exemption No. 3 of 2011 (Determination No. 3) was enacted to amend the Banking exemption No. 1 of 2011 (Determination No. 1) under the Banking Act 1959. This legislation was introduced to address the need to add Temple Society Australia to the list of charitable development funds that are exempt from the prohibition on carrying on banking business in Australia unless authorised by the Australian Prudential Regulation Authority (APRA). Determination No. 1 originally exempted certain funds from this prohibition, provided they met specific conditions. The purpose of Determination No. 3 is to update this list by including Temple Society Australia, thereby ensuring that the exemption criteria continue to appropriately target the intended entities while maintaining regulatory oversight. The amendment was made following consultation with the affected fund and the Office of Best Practice Regulation, which confirmed that no additional regulatory analysis was necessary due to the minor nature of the change.
Scope and Application
The Banking exemption No. 3 of 2011, issued by the Australian Prudential Regulation Authority (APRA), applies to the Banking Act 1959. Specifically, this instrument amends the Banking exemption No. 1 of 2011, which provides certain charitable development funds with exemptions from the prohibitions under sections 7 and 8 of the Banking Act. These sections generally prohibit any person or body corporate from carrying on banking business in Australia without APRA's authorisation. The exemption applies to entities listed in Schedule 1 of Determination No. 1, subject to compliance with the conditions outlined in Schedule 2. The exemption granted by Determination No. 3 extends to Temple Society Australia, which has been added to the list of funds in Schedule 1, provided it meets the specified conditions. The geographical scope of this Act is national, applying across Australia, and it is administered at the Commonwealth level by APRA. There are no stated exclusions or thresholds in this determination beyond the conditions specified in Schedule 2. The application of the Act may be further extended or modified through subsequent determinations by APRA, as permitted under subsection 11(4) of the Banking Act 1959.
Key Provisions
The main operative sections of the Banking exemption No 3 of 2011 (Determination No. 3) are subsection 11(1) and 11(4) of the Banking Act 1959. These sections allow 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 to vary or revoke any such determination. Determination No. 3 specifically amends Determination No. 1 by adding Temple Society Australia to the list of charitable development funds exempt from the prohibition on carrying on banking business in Australia unless authorised by APRA. This determination will come into force on the day it is registered on the Federal Register of Legislative Instruments (FRLI).
Under the Banking Act 1959, any person or body corporate is prohibited from carrying on banking business in Australia unless authorised by APRA. Determination No. 1 initially exempted certain charitable development funds from this prohibition, provided they complied with the specified conditions. Determination No. 3 now further varies Determination No. 1 by adding Temple Society Australia to the list of exempt funds. This means Temple Society Australia is now permitted to carry on banking business in Australia under the same conditions outlined in Schedule 2 of Determination No. 1.
The obligations imposed by this determination on Temple Society Australia and other affected entities include adhering to the conditions specified in Schedule 2 of Determination No. 1. These conditions likely relate to the governance, financial reporting, and operational standards that must be met to maintain the exemption. APRA will likely monitor compliance with these conditions to ensure that the exemption does not result in any risks to the financial system.
Failure to comply with the conditions set out in Schedule 2 of Determination No. 1 may result in breach of the Banking Act 1959. While the legislation does not explicitly state the penalties for breach, generally, breaches of banking laws can lead to both civil and criminal consequences. Civil penalties could include fines, while criminal penalties could include imprisonment, reflecting the seriousness of maintaining financial stability and consumer protection in the banking sector. The exact penalties would be determined by a court based on the specifics of the breach.