Banking (restricted word or expression) consent No. 3 of 2015

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Banking Act 1959, paragraphs 66(2)(c) and 66(1)(d)

Subsection 66(1) of the Banking Act 1959 (the Act) prohibits a person who carries on a financial business, whether or not in Australia, from assuming or using in Australia a restricted word or expression in relation to that financial business without APRA’s consent. Paragraph 66(1)(d) of the Act provides that APRA may consent to the use or assumption of a restricted word or expression.  Paragraph 66(2)(c) provides that APRA may revoke a consent.

On 14 December 2015, APRA made Banking (consent to assume or use restricted word or expression) No. 3 of 2015 (the instrument), which:

• revokes Banking (consent to use restricted word or expression) No. 1 of 2015 made on 6 August 2015 (the Consent), which allowed building societies, credit unions, and trustees of superannuation entities to use certain restricted words or expression in the circumstances, and subject to the conditions, specified in the consent; and
• makes a new class consent in the same terms, but with alterations to the lists of  entities to which the class consent relates.

The instrument commences on the day that it is registered on the Federal Register of Legislative Instruments.

1.                Background

Under section 66 of the Act, the use of the following terms is restricted:

• ‘bank’, ‘banker’ and ‘banking’;
• ‘building society’, ‘credit union’ and ‘credit society’;
• terms that have been specified in a determination in force under subsection 66(5), such as ‘credit co-operative’; and
• any other word or expression that is of like import to any of these terms.

2.                   Purpose of the amending instrument

The Consent permitted the uses of the restricted words or expressions banker, banking”, ‘building society’, ‘credit union’, ‘credit society’ or ‘credit co-operative’ by a building society or credit union, or a related body corporate of either, in relation to the financial business of the entity, subject to a range of conditions.

The Consent also permitted a credit union or building society to use the word or expression ‘mutual banking’ only in its marketing and branding material.

The Consent also permitted the trustee of a superannuation entity whose members are current or former officers or employees of an authorised deposit taking institution (ADI) to use the name of the ADI in the name of the trustee or superannuation entity despite the fact that the ADI’s name contains the restricted word or expression ‘bank’, ‘banker’, ‘banking’, ‘credit union, ‘credit society’ or ‘credit co-operative’. 

While the instrument reproduces the same consents and conditions as were in the Consent, Schedule 3 has been varied.  The reason for this is that, although some of the entities that were granted consent were defined according to their characteristics, “building societies” and “credit unions” were confined to those entities included in lists of entities in Schedules 2 and 3 respectively of the Consent.  Consequently, when membership of the class of entities authorised by APRA to conduct business as building societies or credit unions changes, amendment must be made to Schedules 2 and 3.  The instrument amends Schedule 3 to take into account reductions in the number of building societies and credit unions since the Consent was made in August 2015.

3. Consultation

APRA has not undertaken a consultation in relation to this instrument as it is an instrument that is of a minor or machinery nature and that does not substantially alter existing arrangements.

4.                   Regulation Impact Statement

The Office of Best Practice Regulation has confirmed that a Regulation Impact Statement is not required.

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 (consent to assume or use restricted word or expression) No. 3 of 2015

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 Instruments

The instrument revokes the existing Banking (consent to use restricted word or expression) No. 1 of 2015 made on 6 August 2015 and replaces it with a new consent. The new consent continues to allow credit unions and building societies (and their related bodies corporate) and trustees of certain superannuation entities to use certain words and expressions that are restricted under the Banking Act 1959, such as ‘banker’, ‘banking’, ‘building society’ and ‘credit union’. The new consent merely updates the list of entities that are identified as building societies” and “credit unions” for the purposes of the consent.

Human rights implications

APRA has assessed the 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.