EXPLANATORY STATEMENT
STATUTORY RULES 1984 NO 168
ISSUED BY AUTHORITY OF THE TREASURER
BANKING ACT 1959
BANKING (SAVINGS BANKS) REGULATIONS (AMENDMENT)
Section 71 of the Banking Act 1959 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act, prescribing all matters which by the Act are required or permitted to be prescribed or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act. Section 37 of the Act provides that Regulations made under the Act shall cover, inter alia, the following matters:
• defining the classes of persons from whom savings banks may not accept deposits; and
• defining the classes of persons whom a savings bank may permit to draw cheques on an account maintained with the savings bank.
On 10 April 1984 the Treasurer announced that the Government had decided to amend the Banking (Savings Bank) Regulations (the Regulations), with effect from 1 August 1984, to:
• remove the $100,000 limit on deposits by a trading or profit-making body; and
• allow savings banks to offer cheque facilities on all accounts.
It was decided subsequently that the Regulations should be amended to allow loans to authorised dealers in the short-term money market to count towards the requirement for a savings bank to maintain in investments of specified kinds (liquids and government securities) an amount representing not less than 15 per cent of deposits in Australia of the savings bank. This amendment to the Regulations is also to become effective on 1 August 1984.
The opportunity is being taken to repeal a transitional provision, arising out of amendments made to the Regulations in 1982, which is no longer operative.
The amending Regulations repealsub-regulation 5(3) of the Regulations. Sub-regulation 5(3) is a transitional provision, operative in the period from 31 August 1982 to 30 June 1983, specifying that savings banks hold at least 7.5 per cent of their Australian deposits in deposits with the Reserve Bank and Treasury Notes, and at least 15 per cent in those investments together with cash on hand in Australia and other securities issued by the Commonwealth.
From 1 July 1983 sub-regulation 5(4) has required savings banks to hold at least 15 per cent of their Australian deposits in deposits with the Reserve Bank, cash on hand in Australia, Treasury Notes and other securities issued by the Commonwealth. The proposed amendment to sub-regulation 5(4) provides for loans to authorised dealers in the short-term money market that are secured by Commonwealth Government securities to also count as investments in terms of that 15 per cent requirement.
The proposed Regulations repeal regulation 6A and regulation 7 and substitute a new regulation 7. Regulation 6A provides that savings banks shall not accept deposits exceeding $100,000 from certain companies or other bodies. Regulation 7 restricts savings banks from offering cheque facilities on accounts, other than those of a local authority, company, body, society or club (not including a trading or profit-making body). The new regulation 7 allows savings banks to offer cheque facilities on all accounts.
Overview
The Banking (Savings Banks) Regulations (Amendment) 1984, issued under the authority of the Treasurer and pursuant to the Banking Act 1959, were enacted to address certain regulatory gaps and outdated provisions within the existing banking framework. The primary objective of these amendments was to modernise the regulatory environment for savings banks by removing unnecessary restrictions and enhancing flexibility in operations. The amendments were introduced by the Commonwealth Government and were effective from 1 August 1984. They removed the $100,000 limit on deposits by trading or profit-making bodies, allowing savings banks greater freedom in accepting deposits. Additionally, the regulations were updated to permit savings banks to offer cheque facilities on all accounts, thereby improving service offerings. Furthermore, the amendments sought to count loans to authorised dealers in the short-term money market as investments, provided they are secured by Commonwealth Government securities, aligning the regulatory requirements with contemporary financial practices. The repeal of certain transitional provisions that had become obsolete also ensured that the regulatory framework remained relevant and efficient.
Scope and Application
The Banking (Savings Banks) Regulations (Amendment) Statutory Rules 1984 No 168, issued under the authority of the Treasurer, amends the existing Banking (Savings Banks) Regulations, made pursuant to Section 71 of the Banking Act 1959. These regulations apply to savings banks operating within Australia, encompassing their ability to accept deposits and offer cheque facilities. The amendments, effective from 1 August 1984, remove the $100,000 limit on deposits accepted by trading or profit-making bodies and allow savings banks to offer cheque facilities on all accounts, including those of trading or profit-making entities. Additionally, the Regulations now permit loans to authorised dealers in the short-term money market, secured by Commonwealth Government securities, to be counted as investments towards the requirement of maintaining at least 15 per cent of deposits in Australia in specified investments. These changes also involve the repeal of transitional provisions from previous amendments, thereby streamlining the regulatory framework governing savings banks.
Key Provisions
The main operative sections of these regulations, which amend the Banking (Savings Banks) Regulations, include the removal of the $100,000 limit on deposits by trading or profit-making bodies (Regulation 6A) and the allowance of cheque facilities on all accounts (Regulation 7). Additionally, the regulations permit loans to authorised dealers in the short-term money market, secured by Commonwealth Government securities, to count towards the 15 per cent requirement for investments (Regulation 5(4)). These amendments, effective from 1 August 1984, aim to provide greater flexibility and operational efficiency to savings banks.
The amended regulations impose certain obligations on savings banks. Firstly, they must now allow deposits from trading or profit-making bodies without the previous $100,000 limit, enabling a broader range of entities to utilise savings bank services. Secondly, savings banks must offer cheque facilities on all accounts, not just those held by local authorities, companies, bodies, societies, or clubs (excluding trading or profit-making bodies). Furthermore, savings banks must ensure that at least 15 per cent of their Australian deposits are held in investments such as deposits with the Reserve Bank, cash on hand in Australia, Treasury Notes, and other securities issued by the Commonwealth, including loans to authorised dealers in the short-term money market secured by Commonwealth Government securities.
Under these regulations, there are no specific offences or penalties outlined. However, savings banks must comply with the regulatory requirements to avoid potential consequences such as regulatory action, reputational damage, or loss of customer trust. Failure to adhere to the stipulated investment requirements could also result in financial instability or non-compliance with banking standards, potentially leading to regulatory scrutiny or penalties under broader banking legislation.
In summary, the amendments to the Banking (Savings Banks) Regulations provide savings banks with greater flexibility in accepting deposits and offering cheque facilities while ensuring compliance with investment requirements. These changes aim to enhance operational efficiency and customer service without explicitly outlining penalties for non-compliance, emphasising the importance of adherence to regulatory standards to maintain financial stability and trust.