Banking (prudential standards) determination No.2 of 2008
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Banking Act 1959, section 11AF
Under subsection 11AF(3) of the Banking Act 1959 (Banking Act) APRA may, in writing, revoke a prudential standard made in relation to prudential matters to be complied with by all authorised deposit-taking institutions and authorised non-operating holding companies. Under subsections 11AF(1) APRA may, in writing, determine a prudential standard made in relation to prudential matters to be complied with by all authorised deposit-taking institutions and authorised non-operating holding companies
- Background
The Financial Sector Legislation Amendment (Review of Prudential Decisions) Act 2008 (RPD Act) amended the Banking Act. Amongst other things, the RPD Act introduced a court-based process for disqualifying an individual from certain roles in an authorised deposit-taking institution; it removed the necessity for ministerial consent for some decisions; and it streamlined some of APRA’s directions powers where appropriate.
The Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007 (SRR Act) also amended the Banking Act. Amongst other things, the SRR Act introduced whistleblower protection; it provided for APRA to exercise discretion to vary prudential requirements for a regulated institution; and it harmonised breach reporting across the Life Insurance Act 1995, the Insurance Act 1973, the Banking Act 1959 and the Superannuation Industry (Supervision) Act 1993.
Prudential Standard APS 520 Fit and Proper (APS 520) applies to all authorised deposit-taking institutions and authorised non-operating holding companies. It sets out minimum requirements for these institutions in determining the fitness and propriety of individuals to hold positions of responsibility.
2. Purpose of the Instrument
In light of the recent amendments to the Banking Act, outlined above, APRA is revoking and re-making APS 520 with minor amendments. This is to ensure that APS 520 continues to be consistent with the Banking Act.
3. Operation of the Instrument
This Instrument revokes APS 520 and re-makes the prudential standard with the following minor amendments:
(i) paragraph 18 contains references to sections of the Banking Act that refer to the fit and proper criteria set out in the prudential standards. These references have been updated to remain consistent with the Banking Act;
(ii) paragraph 21 contains references to sections of the Banking Act that refer to the fit and proper criteria of an auditor set out in the prudential standards. These references have been updated to remain consistent with the Banking Act;
(iii) a footnote has been inserted to the heading above paragraph 33 referring the reader to the relevant section of the Banking Act and prudential standards. It has been included to ensure this prudential standard is read in conjunction with the whistleblowing provisions in the Banking Act. It improves consistency between the fit and proper standards across the APRA-regulated industries; and
(iv) paragraph 46 has been inserted to improve consistency between the fit and proper prudential standards across different APRA-regulated industries. Paragraph 46 of the new APS 520 replicates paragraph 48 of Prudential Standard GPS 520 Fit and Proper (March 2006), a prudential standard made under section 32 of the Insurance Act 1973 (Insurance Act). Paragraph 46 reflects section 11AF(2) of the Banking Act which was amended by the SRR Act so as to be consistent with subsection 32(3D) of the Insurance Act.
4. Consultation
APRA considered that public consultation was not necessary for the amendments to APS 520. The amendments are minor and consequential to amendments to the Banking Act. The Treasury conducted public consultation in relation to these amendments to the Banking Act.
APRA undertook public consultation on the broader proposal to introduce fit and proper requirements across all APRA-regulated institutions.