Banking (prudential standards) determination No.1 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 subsection 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 510 Governance (APS 510) applies to all authorised deposit-taking institutions and authorised non-operating holding companies. It sets out minimum foundations for good governance of regulated institutions. It aims to ensure that regulated institutions are managed in a sound and prudent manner by a competent Board of directors, which is capable of making reasonable and impartial business judgements in the best interests of the regulated institution and which gives due consideration to the impact of its decisions on depositors.
2. Purpose of the Instrument
In light of the recent amendments to the Banking Act, outlined above, APRA is revoking and re-making APS 510 with minor amendments. This is to ensure that APS 510 continues to be consistent with the Banking Act.
3. Operation of the Instrument
This Instrument revokes APS 510 and re-makes the prudential standard with the following minor amendments:
(i) a footnote has been inserted in to the heading above paragraph 58 to ensure this part of the prudential standard is read in conjunction with the whistleblowing provisions in the Banking Act and in Prudential Standard APS 520 Fit and Proper;
(ii) paragraph 60 has been included to preserve transitional relief for auditors that was available under the previous version of APS 510; and
(iii) paragraph 61 has been included to improve consistency between the fit and proper prudential standards across different APRA-regulated industries. Paragraph 60 of the new APS 510 replicates paragraph 65 of Prudential Standard GPS 510 Governance (May 2006), a prudential standard made under section 32 of the Insurance Act 1973 (Insurance Act). Paragraph 61 reflects subsection 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 510. 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 governance requirements across all APRA-regulated institutions.