Conditions on Banking Authority 2023 – Challenger Bank Limited

Administered by Department of the Treasury

Legislation au C2023G00902 In force Gazette

Legislation content

 

Conditions on banking authority 2023 – Challenger Bank Limited

Banking Act 1959

 

To: Challenger Bank Limited ABN 54 087 651 750 (the ADI)

 

SINCE the ADI holds a section 9 authority under the Banking Act 1959 (the Act) to carry on banking business in Australia (the authority) that is subject to conditions, as specified in the schedule (the existing conditions),

 

I, Chris Gower, a delegate of APRA, under paragraph 9AA(1)(b) of the Act, VARY the conditions on the authority by replacing the existing conditions with the conditions specified in the schedule (the varied conditions).

 

This instrument commences on the day it is made. Dated: 1 August 2023

 

 

Chris Gower General Manager Banking Division

 

Interpretation

In this instrument:

APRA means the Australian Prudential Regulation Authority.

ADI, banking business and section 9 authority have their respective meanings given in subsection 5(1) of the Act.

 

Notes

APRA is required to publish this instrument in the Gazette.

A decision to impose conditions or additional conditions, or vary the conditions, on a section 9 authority is a decision to which Part VI of the Act applies. You may request APRA reconsider the decision in accordance with subsection 51B(1) of the Act. The request for reconsideration must be made in writing, must state the reasons for the request, and must be given to APRA within 21 days after the day on which you first received notice of this decision, or within such further period as APRA allows. If you are dissatisfied with the outcome of APRA’s reconsideration of the decision, you may, subject to the Administrative Appeals Tribunal Act 1975, apply to the Administrative Appeals Tribunal for review of the reconsidered decision. The address where written notice may be given to APRA is Level 12, 1 Martin Place, Sydney NSW 2000.

 

Schedule – the existing conditions

  1. The ADI must consult with APRA prior to commencing any new line of business (on- or off-balance sheet).

 

2.         From 1 March 2022, the Board of the ADI must have at least two independent directors who are not also directors of any other company in the Challenger group.

 

3.        From 1 March 2022, the Board Risk Committee and the Board Audit Committee of the ADI must each have at least one independent director who is not also a director of any other company in the Challenger group.

 

4.        The ADI must maintain a first line credit underwriting function located within the ADI at all times.

 

5.        From 1 November 2021, the ADI must maintain a second line credit risk function located within the ADI at all times.

 

6.        The funds and other assets of the ADI and its subsidiaries must not be used to directly or indirectly fund, or provide security for, the purchase of financial products issued or underwritten by a member of the Challenger group that is not a subsidiary of the ADI except with the written agreement of APRA.

 

7.        The ADI may outsource its treasury management functions to CIP Asset Management (part of Challenger Limited) only to the extent that the functions are already outsourced as at the commencement of this instrument and provided that the value of the total assets of the ADI does not exceed $1 billion.

 

Interpretation

 

In this schedule:

 

Challenger group means Challenger Limited ABN 85 106 842 371 and its subsidiaries (within the meaning of section 50 of the Corporations Act 2001)

 

total assets means the total assets worked out in accordance with the method for calculating total assets under Reporting Standard ARS 320.0 as in force from time to time and, if Reporting Standard ARS 320.0 is replaced by a different Reporting Standard, that Reporting Standard as in force from time to time

Schedule – the varied conditions

  1. The ADI must consult with APRA prior to commencing any new line of business (on- or off-balance sheet).

 

2.        The Board of the ADI must have at least:

 

(a)     one independent director who is not also a director of any other company in the Challenger group; and

(b)     one other director who is not also a director of any other company in the Challenger group.

 

3.        From 1 March 2022, the Board Risk Committee and the Board Audit Committee of the ADI must each have at least one independent director who is not also a director of any other company in the Challenger group.

 

4.        The ADI must maintain a first line credit underwriting function located within the ADI at all times.

 

5.        From 1 November 2021, the ADI must maintain a second line credit risk function located within the ADI at all times.

 

6.        The funds and other assets of the ADI and its subsidiaries must not be used to directly or indirectly fund, or provide security for, the purchase of financial products issued or underwritten by a member of the Challenger group that is not a subsidiary of the ADI except with the written agreement of APRA.

 

7.        The ADI may outsource its treasury management functions to CIP Asset Management (part of Challenger Limited) only to the extent that the functions are already outsourced as at the commencement of this instrument and provided that the value of the total assets of the ADI does not exceed $1 billion.

 

Interpretation

 

In this schedule:

 

Challenger group means Challenger Limited ABN 85 106 842 371 and its subsidiaries (within the meaning of section 50 of the Corporations Act 2001)

 

total assets means the total assets worked out in accordance with the method for calculating total assets under Reporting Standard ARS 320.0 as in force from time to time and, if Reporting Standard ARS 320.0 is replaced by a different Reporting Standard, that Reporting Standard as in force from time to time

Overview

The Conditions on Banking Authority 2023, issued under the Banking Act 1959, aims to regulate the operations of Challenger Bank Limited, an authorised deposit-taking institution (ADI) that holds a section 9 authority to conduct banking business in Australia. The Act, enacted by the Australian Parliament, was introduced to establish a framework for the prudential supervision of authorised deposit-taking institutions and to protect the financial interests of depositors. This legislative instrument, issued by Chris Gower, a delegate of the Australian Prudential Regulation Authority (APRA), modifies the conditions on Challenger Bank Limited’s authority to ensure that it continues to meet the necessary standards for financial stability and integrity. The policy objective is to safeguard the banking sector and maintain public confidence in the financial system. The varied conditions, specified in the schedule, include requirements for board composition, credit risk management, and restrictions on the use of bank funds, among others.

Scope and Application

The Conditions on banking authority 2023 – Challenger Bank Limited, as specified under the Banking Act 1959, applies to Challenger Bank Limited, an authorised deposit-taking institution (ADI) holding a section 9 authority to carry on banking business in Australia. This Act, administered by the Australian Prudential Regulation Authority (APRA), imposes specific conditions on the ADI's banking authority to ensure the institution's operational integrity and stability. These conditions include requirements for board composition, the maintenance of specific credit functions, and restrictions on the use of the ADI's funds and assets. The Act applies across the Commonwealth of Australia and extends to all subsidiaries within the Challenger group. Notably, this legislation does not specify any exclusions or exemptions but does provide for the variation of existing conditions through subordinate instruments as per the Act's provisions. APRA retains the authority to further refine or impose additional conditions as necessary, subject to the stipulated process for reconsideration and review under the Act and other relevant legislation such as the Administrative Appeals Tribunal Act 1975.

Key Provisions

The Conditions on Banking Authority 2023 (Gazette) outlines the varied conditions under which Challenger Bank Limited, an Authorised Deposit-taking Institution (ADI) under the Banking Act 1959, operates in Australia. The Act provides the statutory authority for these conditions, which were previously established but have now been varied by this instrument (section 1). The varied conditions impose specific obligations on Challenger Bank Limited regarding its governance structure, risk management, and asset utilisation. For instance, the Board of the ADI must include at least one independent director and one other director who are not directors of any other company within the Challenger group (Schedule, Condition 2). Additionally, both the Board Risk Committee and the Board Audit Committee must each have at least one independent director who is not also a director of any other company in the Challenger group (Schedule, Condition 3). The Act imposes several key obligations on Challenger Bank Limited. Foremost among these is the requirement to consult with the Australian Prudential Regulation Authority (APRA) before initiating any new line of business, whether on- or off-balance sheet (Schedule, Condition 1). Furthermore, the bank must maintain certain internal functions, such as a first line credit underwriting function and a second line credit risk function, both of which must be located within the ADI at all times (Schedule, Conditions 4 and 5). Another significant obligation is the restriction on using the bank's funds and assets to directly or indirectly fund, or provide security for, the purchase of financial products issued or underwritten by other members of the Challenger group that are not subsidiaries of the ADI, except with APRA's written consent (Schedule, Condition 6). Lastly, the bank is permitted to outsource its treasury management functions to CIP Asset Management, a part of Challenger Limited, but only to the extent that such functions were already outsourced at the commencement of this instrument and provided that the value of the bank's total assets does not exceed $1 billion (Schedule, Condition 7). Failure to comply with the conditions specified in this instrument may result in various consequences. While the specific offences and penalties are not detailed within the text of the legislation, breaches of banking conditions under the Banking Act 1959 can generally lead to enforcement actions by APRA, which may include fines, public censure, or in severe cases, revocation of the banking authority. It is important to note that the maximum penalties for such breaches are not explicitly stated in the provided text, but they can be found in the relevant sections of the Banking Act 1959. Additionally, persistent or significant breaches may result in further scrutiny, investigations, or even criminal charges, depending on the nature and severity of the violation.

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Area of Law
Financial Regulation
Instrument
Gazette Notice
Concepts
Consultation Requirements
Licensing & Registration
Reporting & Disclosure Obligations
Regulatory Standards
Catchwords
Conditions on banking authority

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.