Banking exemption No. 4 of 2014

Administered by Department of the Treasury

Legislation au F2014L01639 Not in force Legislative Instrument

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Banking exemption No. 4 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. 4 of 2014 (2015 Exemption) is a new determination and will come into force on 1 January 2015.

 

  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 2014 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. This exemption was revoked and a new exemption, Banking Exemption No. 3 of 2014 (2014 Exemption), was remade on 13 October 2014 to add an extra entity to the list of entities exempted under subsection 11(1). The 2014 Exemption will expire on 31 December 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 Act. The 2015 Exemption is intended to allow Religious Charitable Development Funds to operate under the same conditions as those currently attaching to the 2014 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 2015.

2.      Purpose and operation of the instrument

The purpose of the 2015 Exemption is to continue to exempt those Funds, as applicable, listed in the 2014 Exemption from the prohibitions in section 7 and 8 of the Banking Act for a further period of 12 months.

3.      Consultation

APRA has advised 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 2015.

 

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. 4 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. 4 of 2014 was enacted to address the specific needs of Religious Charitable Development Funds operating in Australia. The Banking Act 1959 prohibits individuals and unincorporated bodies from conducting banking business unless exempted by a determination made under section 11 of the Act. This legislative instrument, prepared by the Australian Prudential Regulation Authority (APRA), extends the exemption for Religious Charitable Development Funds, which are established for religious and charitable purposes and typically operate on a not-for-profit basis. The exemption allows these funds to continue their operations without needing to be authorised as deposit-taking institutions, subject to certain conditions regarding their financial products and marketing practices. The exemption is intended to provide continuity for these entities, facilitating their ongoing charitable activities within the regulatory framework.

Scope and Application

The Banking exemption No. 4 of 2014 applies to Religious Charitable Development Funds, which are established to borrow and utilise money for religious and charitable purposes, and are typically operated on a not-for-profit basis. This exemption, effective from 1 January 2015, allows these funds to conduct banking business in Australia without needing to be authorised under the Banking Act 1959, provided they comply with specific conditions. These conditions include limitations on the types of financial products and services they can offer and restrictions on advertising and marketing related to these financial products. The exemption is limited geographically to Australia and applies to the specified funds only, not extending to other entities or individuals. The exemption will remain in effect until 31 December 2015, after which APRA will review its operation and conditions. The exemption is an administrative tool under the Banking Act, which allows the Australian Prudential Regulation Authority (APRA) to determine exemptions from certain provisions of the Act, subject to review and potential revocation.

Key Provisions

The Banking exemption No. 4 of 2014 (2015 Exemption) is a legislative instrument under the Banking Act 1959, section 11(1) (section 11(1)) which determines that certain sections of the Banking Act do not apply to specified entities for a period of 12 months. This determination allows Religious Charitable Development Funds to continue to operate without being subject to the prohibitions in sections 7 and 8 of the Banking Act, provided they meet the specified conditions. The 2015 Exemption specifically targets these funds, which are established for religious and charitable purposes and are operated on a not-for-profit basis. It is important to note that this exemption does not apply to any other entities or individuals, and the funds must adhere strictly to the conditions outlined in the exemption. The obligations imposed on the parties governed by the 2015 Exemption include compliance with the conditions specified in the determination, which relate to the facilities offered in connection with the financial products and any advertising or marketing in connection with these products. The entities must ensure that their operations align with the purpose of the exemption, which is to permit the continued operation of Religious Charitable Development Funds under specific conditions. Failure to comply with these conditions could result in the exemption being revoked or varied by the Australian Prudential Regulation Authority (APRA). The funds must also ensure that their activities do not contravene any other relevant legislation or regulatory requirements. The Banking Act 1959 imposes various offences and penalties for breaches of its provisions. For instance, under section 7, it is an offence for a person who is not a body corporate to carry on banking business in Australia without an applicable determination in force, and under section 8, it is an offence for a body corporate to do the same if it is not an authorised deposit-taking institution or the Reserve Bank, unless exempted by a determination. The penalties for these offences can include substantial fines, and in severe cases, imprisonment. The 2015 Exemption aims to prevent such penalties by providing a lawful framework for the specified Religious Charitable Development Funds to operate. However, any misuse or non-compliance with the conditions of the exemption could lead to its revocation or variation, potentially exposing the entities to the penalties outlined in the Banking 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.