Conditions on banking authority 2023 – PayPal Australia Pty Ltd
Banking Act 1959
To: PayPal Australia Pty Ltd ABN 93 111 195 389 (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: 27 June 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
- The banking business that the ADI is authorised to carry on is confined to providing purchased payment facilities. A purchased payment facility has the meaning set out in subsection 9(1) of the Payment Systems (Regulation) Act 1998.
2. The ADI must, at all times, hold Tier 1 capital in the greater of the following two amounts:
a) $5 million; or
b) 5% of total outstanding stored value liabilities.
Stored value liabilities has the meaning set out in paragraph 6 of prudential standard APS 610.
3. The ADI must not pay interest on amounts held for the benefit of its customers.
Schedule – the varied conditions
- The banking business that the ADI is authorised to carry on is confined to providing purchased payment facilities. A purchased payment facility has the meaning set out in subsection 9(1) of the Payment Systems (Regulation) Act 1998.
2. The ADI must not pay interest on amounts held for the benefit of its customers.
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Overview
The Conditions on Banking Authority 2023, made under the Banking Act 1959, aims to address the conditions attached to the section 9 authority held by PayPal Australia Pty Ltd (ADI) to conduct banking business in Australia. This legislation, enacted in 2023, is a variation of the existing conditions imposed on the ADI's authority, which was previously subject to specific financial and operational constraints. The Australian Prudential Regulation Authority (APRA) has the power to impose or vary conditions on a section 9 authority, and in this instance, has modified the conditions to streamline the regulatory framework for the ADI. The policy objective of this variation is to refine the regulatory oversight of the ADI while maintaining the integrity and stability of the Australian financial system. The new conditions focus on ensuring that the ADI remains within the confines of providing purchased payment facilities and prohibiting the payment of interest on customer deposits, thereby maintaining the delicate balance between innovation in financial services and prudential safety.
Scope and Application
The Conditions on banking authority 2023 – PayPal Australia Pty Ltd instrument, as enacted under the Banking Act 1959, applies to PayPal Australia Pty Ltd, specifically identifying the entity by its Australian Business Number (ABN). This instrument governs the conditions attached to the section 9 authority held by the Australian Prudential Regulation Authority (APRA) for PayPal Australia Pty Ltd to conduct banking business in Australia. The varied conditions restrict the banking business to providing purchased payment facilities, as defined under the Payment Systems (Regulation) Act 1998, and prohibit the payment of interest on customer deposits. The legislation applies on a national level within Australia and includes no specific exclusions or thresholds beyond those stated in the varied conditions. The application of the Act is further extended or restricted through subordinate instruments, with any reconsideration requests or appeals following the processes outlined in the Act and associated administrative tribunal acts.
Key Provisions
The Conditions on Banking Authority 2023 (Gazette) primarily modifies the conditions attached to PayPal Australia Pty Ltd's section 9 authority under the Banking Act 1959. This authority permits the company to conduct banking business in Australia, specifically limited to providing purchased payment facilities as defined in the Payment Systems (Regulation) Act 1998 (section 1). The existing condition that required PayPal to hold a minimum Tier 1 capital amount has been removed in the varied conditions. Instead, the new conditions retain the restriction on paying interest on amounts held for customers (section 2). These changes were implemented to streamline the regulatory requirements imposed on PayPal, while maintaining consumer protection standards.
Under the varied conditions, PayPal Australia Pty Ltd must adhere to several obligations. Firstly, it must confine its banking activities strictly to providing purchased payment facilities, ensuring it does not engage in any other form of banking business (section 1). Furthermore, the company is prohibited from paying interest on the funds held for its customers (section 2). These conditions aim to ensure that PayPal operates within the bounds set by the regulatory framework, focusing its services on payment facilitation without expanding into broader financial services.
The legislation does not explicitly outline offences or penalties for breaching the conditions. However, under the Banking Act 1959, breaches of the conditions on a section 9 authority could potentially lead to regulatory actions, including further conditions being imposed, the authority being suspended or cancelled, or even legal proceedings. The maximum penalties for such breaches would depend on the specific nature and severity of the breach, as well as any relevant provisions in other financial services legislation. It is crucial for PayPal to comply with the conditions to avoid these potential repercussions.