EXPLANATORY STATEMENT
STATUTORY RULES 1986 NO. 392
ISSUED BY THE AUTHORITY OF THE TREASURER
BANKING ACT 1959
BANKING (SAVINGS BANKS) REGULATIONS (AMENDMENTS)
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 for carrying out or giving effect to the Act.
Section 37 of the Act provides that Regulations made under the Act shall include provisions for certain matters, including:
• defining the banks with which savings banks may place money on deposit or to which they may lend money;
• defining the classes of persons from whom savings banks may not accept deposits.
Regulation 6 of the Banking (Savings Banks) Regulations prohibited a savings bank from accepting deposits from another savings bank. When in 1982 the previous restrictions on savings banks accepting deposits from commercial enterprises were relaxed, it was intended to impose the minimum restriction in practice while still complying with Section 37 of the Act, and so it was decided to confine the class of persons from whom savings banks could not accept deposits to other savings banks. However, Regulation 6 placed an unnecessary constraint on the activities of two savings banks which are members of one banking group. Accordingly, the Regulation 6 has been amended to permit a savings bank to accept deposits from another savings bank which is a member of the same banking group. In amending Regulation 6 it was necessary to make a similar amendment to Regulation 4, a complementary provision which stipulates those banks to which a savings bank may make loans or with which it may place money on deposit.
Details of the amended Regulations is as follows:
• Regulation 4 was amended to allow a savings bank to place money on deposit with or lend money to a savings bank which is its wholly-owned subsidiary or of which it is a wholly-owned subsidiary, while continuing otherwise not to allow deposits with or loans to other savings banks.
• Regulation 6 was amended to allow a savings bank to accept deposits from a savings bank which is its wholly owned subsidiary or of which it is a wholly-owned subsidiary.
Overview
The Banking (Savings Banks) Regulations (Amendments) Statutory Rules 1986, issued under the authority of the Treasurer, amended the Banking (Savings Banks) Regulations 1959. This amendment sought to address the unnecessary constraints imposed on savings banks within a single banking group, specifically allowing a savings bank to accept deposits from or place money on deposit with another savings bank that is part of the same banking group. The 1959 Act provided the framework for these regulations, with Section 71 empowering the Governor-General to enact such regulations, while Section 37 outlined the matters to be included, such as defining permissible deposit sources and recipients. The policy objective behind these amendments was to streamline banking operations within a banking group while maintaining compliance with the Act's requirements and regulatory intent.
Scope and Application
The Banking (Savings Banks) Regulations (Amendments) issued under the Banking Act 1959, primarily affects savings banks, which are a specific class of financial institutions within the Australian banking system. These regulations govern the scope of permissible financial transactions between savings banks, particularly focusing on the acceptance of deposits and the making of loans. The amendments are designed to provide greater flexibility to savings banks that are part of the same banking group, thereby allowing them to engage in certain transactions with wholly-owned subsidiaries while restricting dealings with other savings banks. Geographically, these regulations apply across the Commonwealth of Australia, ensuring uniform application of the amended rules throughout the country. While the primary amendments concern the relaxation of restrictions on inter-savings bank deposits and loans within the same banking group, they do not extend to other types of financial institutions or to commercial enterprises, thus maintaining the legislative intent to limit such transactions to within the defined parameters of the banking group. The regulations are made under the authority granted by Section 71 of the Banking Act 1959, and their scope is further refined and clarified by the specific provisions outlined in the amended Regulations.
Key Provisions
The primary changes to the Banking (Savings Banks) Regulations, as detailed in Statutory Rules 1986 No. 392, pertain to Regulations 4 and 6 of the Banking Act 1959. Regulation 4, which previously prohibited savings banks from placing money on deposit or lending money to another savings bank, has been amended to allow savings banks to place money on deposit with or lend money to a savings bank that is its wholly-owned subsidiary or of which it is a wholly-owned subsidiary. This change aims to provide greater flexibility within a banking group while maintaining the prohibition on such transactions with other, unaffiliated savings banks. Similarly, Regulation 6, which previously prohibited a savings bank from accepting deposits from another savings bank, has been amended to permit savings banks to accept deposits from a savings bank that is its wholly-owned subsidiary or of which it is a wholly-owned subsidiary. These amendments are intended to align the regulations with practical banking activities within a group while continuing to impose necessary restrictions to maintain financial stability and compliance with the Banking Act.
The amendments impose specific obligations on savings banks to adhere to these new regulatory provisions. Savings banks must ensure that any deposits placed or loans made are only with or to wholly-owned subsidiaries within the same banking group. They must also ensure that any deposits accepted are from wholly-owned subsidiaries. Failure to comply with these stipulations could result in regulatory scrutiny or penalties. Additionally, the amendments require banks to maintain appropriate records and documentation to demonstrate compliance with these regulations, including evidence of the ownership structure between the banks involved in any deposits or loans.
Breach of these regulations could result in significant legal consequences. Under the Banking Act 1959, non-compliance with the prescribed regulations can lead to enforcement actions by the relevant authorities, including potential administrative penalties. The Act does not specify maximum penalties within the explanatory statement, but general provisions within the Act and related legal frameworks could include fines or other corrective measures. In severe cases, persistent or egregious non-compliance might result in more stringent actions, including the possibility of revocation of the institution's licence to operate as a savings bank. These consequences underscore the importance of adhering to the amended regulations to avoid legal and financial repercussions.