Banking (prudential standard) determination No. 19 of 2007
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Banking Act 1959, subsection 11AF(3)
Under paragraphs 11AF(1)(a) and (b) of the Banking Act 1959 (the Act), APRA has the power to determine standards (prudential standards), in writing, in relation to prudential matters to be complied with by authorised deposit-taking institutions (ADIs). Under subsection 11AF(3) of the Act, APRA may, in writing, vary or revoke a prudential standard.
Banking (prudential standard) determination No. 2 of 2006 determined Prudential Standard APS 510 Governance (APS 510) to take effect on 1 October 2006. Banking (prudential standard) determinations No. 16 of 2006 and No. 2 of 2007 varied APS 510. Banking (prudential standard) determination No. 19 of 2007 varies APS 510.
This variation will take effect on 1 January 2008.
- Background
On 22 November 2007, APRA made Banking (prudential standard) determination No. 2 of 2007 which varied APS 510, effective on 1 January 2008. Subsequently, APRA identified that this variation to APS 510 contained a minor error which needed to be corrected.
2. Purpose of the instrument
The instrument varies APS 510 to ensure consistent use of the term ‘regulated institution’ in the standard.
3. Consultation
APRA did not consult with industry on the change to APS 510 because it is minor in nature and does not impact on the substantive requirements of the standard.
Overview
The Banking (prudential standard) determination No. 19 of 2007, issued by the Australian Prudential Regulation Authority (APRA) under the Banking Act 1959, was enacted to correct a minor error in the previously issued Prudential Standard APS 510 Governance (APS 510). This determination was made necessary to ensure consistent terminology within the prudential standards, specifically rectifying the use of the term ‘regulated institution’ in APS 510. The Banking Act 1959 empowers APRA to determine and subsequently vary or revoke prudential standards to maintain the stability and soundness of the banking sector. Given the minor nature of the correction, APRA opted not to consult with the industry, as it did not affect the substantive requirements of the standard. The variation was intended to take effect on 1 January 2008.
Scope and Application
The Banking (prudential standard) determination No. 19 of 2007 pertains specifically to authorised deposit-taking institutions (ADIs) as defined under the Banking Act 1959. This legislative instrument, crafted by the Australian Prudential Regulation Authority (APRA), modifies Prudential Standard APS 510, specifically to rectify a minor error identified in a previous variation of APS 510 made on 22 November 2007. The determination is intended to ensure that the term ‘regulated institution’ is used consistently within the standard, without altering the core requirements of APS 510. This determination applies nationally across Australia, impacting all ADIs operating within the Commonwealth. Notably, APRA did not engage in industry consultation for this minor amendment, as it does not affect the fundamental obligations imposed by the standard. The amendment is set to take effect from 1 January 2008.
Key Provisions
The Banking (Prudential Standard) Determination No. 19 of 2007 (the Determination) amends Prudential Standard APS 510 Governance (APS 510) to correct a minor error. This amendment will come into effect on 1 January 2008. The primary change involves ensuring the consistent use of the term ‘regulated institution’ within the standard (Section 2). The Determination is grounded in the authority granted under subsection 11AF(3) of the Banking Act 1959, which allows the Australian Prudential Regulation Authority (APRA) to modify or revoke prudential standards in writing.
Under the Determination, authorised deposit-taking institutions (ADIs) are required to align their governance frameworks with the corrected APS 510. This includes ensuring that the term ‘regulated institution’ is uniformly applied throughout their governance documentation, policies, and procedures. The obligation extends to ensuring that all governance practices comply with the updated terminology as specified in the amended standard (Section 2).
APRA did not undertake industry consultation for this amendment due to its minor nature and lack of impact on the substantive requirements of APS 510 (Section 3). However, ADIs must still adhere to the corrected standard as stipulated. Failure to comply with the prudential standards set forth in APS 510 may result in regulatory action by APRA. Potential consequences include enforcement actions, which could range from directives to rectify non-compliance to more severe penalties, including financial penalties or, in extreme cases, revocation of the institution's licence. The exact penalties depend on the severity and nature of the non-compliance, as outlined in the Banking Act 1959.