EXPLANATORY STATEMENT
STATUTORY RULES 1982 NO 206
ISSUED BY THE AUTHORITY OF THE TREASURER
BANKING ACT 1959
BANKING (SAVINGS BANKS) REGULATIONS (AMENDMENT)
Section 71 of the Banking Act 1959 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Sub-section 37(1) of the Act provides, inter alia, that regulations made under the Act (the Banking (Savings Banks) Regulations) shall include provisions with respect to the investment of the funds of savings banks, the banks with which savings banks may place money on deposit or to which they may lend money, the classes of persons from whom savings banks may not accept deposits and the classes of persons to whom a savings bank may provide cheque account facilities, and that the regulations may include other provisions with respect to the conduct of business by savings banks. Sub-section 37(3) of the Act provides, inter alia, that the regulations may provide that the whole or any part of the regulations shall not apply to a specified savings bank.
In his Statement of 18 March 1982 outlining the results of the Government’s review of housing policy, the Treasurer announced that, as a matter of urgency, the Government would amend the Banking (Savings Banks) Regulations with a view to removing existing asset requirements which serve to limit lending for housing, and moving to a minimum liquidity requirement for the savings banks of 15 per cent of depositors’ balances in Australia. The Treasurer mentioned in addition that, when amending
the Regulations, the Government would also give consideration to a recommendation from the Committee of Inquiry into the Australian Financial System that the restriction on sources of savings banks’ deposits be removed.
Existing regulation 4 permits savings banks to place money on deposit with or lend money to any bank. Proposed regulation 1 seeks to amend existing regulation 4 to exclude savings banks from depositing with or lending to other savings banks. This is a technical amendment necessary for consistency with the proposed amendment to regulation 6 referred to below.
Existing sub-regulation 5(2) specifies the items in which a savings bank may invest deposits held in Australia with the savings bank. Proposed sub-regulations 2(a) and (b) seek to remove investment items that are no longer relevant.
Proposed sub-regulation 2(c) seeks to insert a new sub-regulation 5(2AA) to provide the savings banks with additional flexibility in their investments, by allowing them to invest up to 6 per cent of depositors’ balances in Australia in investments of their own choice, but excluding bank premises, sites, furniture and equipment which will continue to be financed from shareholders’ funds.
Existing sub-regulations 5(3) and 5(4) require savings banks to observe minimum asset ratios of 40 per cent for specified assets to depositors’ balances in Australia and 7.5 per cent for liquid assets to depositors’ balances respectively. Existing sub-regulation 5(3A) is a technical provision which adjusts a savings bank’s obligations under existing
sub-regulation 5(3) where its deposits have declined. Proposed sub-regulation 2(d) seeks to delete existing sub-regulations 5(3), 5(3A) and 5(4), and replaces them with new sub-regulations 5(3) and 5(4). Amended sub-regulation 5(4) will put in place the Government’s announced intention to introduce a minimum liquidity requirement for the savings banks of 15 per cent of depositors’ balances in Australia. Eligible assets will comprise cash, deposits with the Reserve Bank, Treasury Notes and other Commonwealth securities. Amended sub-regulation 5(3) will provide for a period of transition, extending to 30 June 1983, during which time a savings bank has the choice of meeting either the existing 7.5 per cent liquidity requirement or the new 15 per cent requirement, thus enabling the smooth restructuring of the savings banks’ operations and asset portfolios.
As mentioned above, the trustee banks will continue to be granted certain exemptions from the Regulations. Existing sub-regulation 5(6) as amended by proposed sub-regulation 2(e) will list those sub-regulations of the amended regulation 5 from which the trustee banks will be exempt. The trustee banks will instead be required to enter into special side-agreements with the Reserve Bank which will place similar but less onerous requirements on them.
Existing regulation 6, relates to persons from whom savings banks may not accept deposits and provides that a savings bank shall not accept a deposit from a company or other body engaged in or formed for the purpose of trading or acquiring pecuniary profit. The Government’s desire to widen the sources of savings banks’ deposits, as foreshadowed in the Treasurer’s statement of 18 March 1982, is effected by proposed regulation 3. The existing regulation 6 will be repealed and, in order
to satisfy the requirements of section 37 of the Act, mentioned above, an amended regulation 6 is to be inserted, defining other savings banks as the class of persons from whom savings banks shall not accept deposits.
Amended sub-regulation 6A(1) will widen the source of savings banks’ deposits by providing that savings banks may accept deposits from trading or profit-making bodies up to a maximum of $100,000 from any one entity. As noted above, at present savings banks are not permitted to accept any deposits from such bodies.
Amended sub-regulation 6A(2) will have the same effect as existing sub-regulation 6(2) and will provide that savings banks may accept deposits of any amount from trading or profit-making bodies where they are acting in the capacity of trustee for a non-trading or non-profit-making body.
Existing regulation 7 permits savings banks to offer cheque account facilities to a local authority, company, body, society or club which maintains an account with the savings bank. In light of the widening of the sources of deposits as a result of amended sub-regulation 6A(l), proposed regulation 4 adds a new sub-regulation 7(3) that will have the effect of preventing the savings banks from being able to offer cheque account facilities to trading or profit-making entities apart from those acting in the capacity of trustee in terms of amended sub-regulation 6A(2). The provision of such facilities to those bodies is considered to be more properly the function of a trading bank.
Proposed regulation 5 provides for an amendment to the Schedule to recognise the change of name of the ‘United Discount Company of Australia Limited’ to ‘AUC Discount Limited’.