Banking (Exemption) Order No. 82

Overview

The Banking (Exemption) Order No. 82, issued in 1996 under the Banking Act 1959, provides an exemption for certain foreign corporations authorised as banks in their home countries from complying with section 66 of the Act. This section generally prohibits the use of the words 'bank', 'banker', or 'banking' in relation to activities in the Australian wholesale capital market, specifically when issuing securities to raise funds. The objective of this Order, as enacted by the Commonwealth of Australia and administered by the Assistant Treasurer on behalf of the Treasurer, is to facilitate legitimate financial activities of foreign banks in Australia while ensuring transparency and compliance with Australian regulations. The Order is conditional upon the securities being issued and traded in parcels of at least A$500,000, and that it is explicitly stated in all related documentation that the issuing bank is not authorised under Australian law.

Scope and Application

The Banking (Exemption) Order No. 82, made under the authority of the Assistant Treasurer acting for the Treasurer, applies specifically to foreign corporations authorised as banks in their home countries that raise funds in the Australian wholesale capital market by issuing securities. This Order is designed to provide exemptions from certain provisions of the Banking Act 1959, particularly section 66, which restricts the use of the terms ‘bank’, ‘banker’ or ‘banking’ in relation to activities conducted outside the scope of authorisation under the Act. The exemption is contingent upon two key conditions: the securities must be offered and/or traded in parcels of not less than A$500,000, and there must be a clear statement on the securities and related information memoranda indicating that the issuing entity is a bank not authorised under the Banking Act 1959. This regulatory approach seeks to balance the need for flexibility in international financial dealings with the imperative of maintaining clear distinctions between authorised and non-authorised financial entities within the Australian market.

Key Provisions

The main operative sections of the Banking (Exemption) Order No. 82, made under section 11 of the Banking Act 1959, provide an exemption for certain foreign corporations from the prohibition against using certain terms in relation to their business activities. Specifically, section 2 of the Order applies to foreign corporations authorised as banks in their home countries that are raising funds in the Australian wholesale capital market by issuing securities. Section 3 grants these corporations an exemption from the prohibition in section 66 of the Banking Act 1959, which typically restricts the use of the terms ‘bank’, ‘banker’ or ‘banking’ by such entities. However, this exemption is subject to the conditions outlined in section 4. The conditions that must be met for the exemption to apply are that the securities must be offered or traded in parcels of not less than A$500,000 (condition 4(a)) and that it must be clearly stated on the securities and any related information memoranda that the securities are being issued by a bank not authorised under the Banking Act 1959 (condition 4(b)). These conditions are designed to ensure that the exemption does not lead to misleading representations in the financial markets. The Order imposes certain obligations and requirements on the foreign corporations to which it applies. They must ensure that the securities they issue are offered and traded in parcels of not less than A$500,000, and they must clearly disclose on the securities and related information memoranda that they are not authorised banks under Australian law. Failure to comply with these conditions would result in the exemption no longer applying, potentially exposing the corporation to the restrictions of section 66 of the Banking Act 1959. Breaches of the conditions outlined in the Order may result in significant consequences. Although the Order itself does not explicitly state penalties for non-compliance, violations could lead to actions under the Banking Act 1959 or other relevant Australian financial legislation. These actions could include fines, legal penalties, or other enforcement measures that could be substantial, depending on the nature and extent of the breach. It is important for the corporations to adhere strictly to the conditions to avoid any legal repercussions.