EXPLANATORY STATEMENT – REVOCATION OF FINANCIAL STABILITY STANDARDS (FSS 2003.1, FSS 2003.2)
The Reserve Bank of Australia (Reserve Bank) has the power under subsection 827D(8) of the Corporations Act 2001 (the Act) to revoke financial stability standards that apply to clearing and settlement facility licensees.
At its November 2012 meeting, the Reserve Bank’s Payments System Board approved the revocation of the Financial Stability Standard for Central Counterparties (FSS 2003.1) and the Financial Stability Standard for Securities Settlement Facilities (FSS 2003.2), each as varied, with effect on 29 March 2013.
The Reserve Bank’s decision to revoke FSS 2003.1 and FSS 2003.2 was made in conjunction with its decision to, pursuant to subsection 827D(1) of the Act, determine the Financial Stability Standards for Central Counterparties and Financial Stability Standards for Securities Settlement Facilities (together, the new FSSs). The new FSSs will replace FSS 2003.1 and FSS 2003.2.
The Reserve Bank’s decision to revoke FSS 2003.1 and FSS 2003.2 and to determine the new FSSs was made following feedback received from stakeholders during a consultation process on a proposal to determine new FSSs. In accordance with subsection 827D(8) of the Act, that process included consultation with the Australian Securities and Investment Commission. The consultation process undertaken by the Reserve Bank is described in more detail in the Regulation Impact Statement, available on the Reserve Bank’s website at http://www.rba.gov.au/payments-system/clearing-settlement/standards/201212-new-fss-ris/index.html.
Documents
- RBA Media Release: New Financial Stability Standards, 5 December 2012, is available on the Reserve Bank’s website at http://www.rba.gov.au/media-releases/2012/mr-12-37.html
- The Regulation Impact Statement detailing these changes, together with attachments setting out the new FSSs and associated guidance, is available on the Reserve Bank’s website at http://www.rba.gov.au/payments-system/clearing-settlement/standards/201212-new-fss-ris/index.html
Overview
The Financial Stability Standards (Revocation) Instrument 2012 (F2012L02539), enacted in 2012, addresses the need to update and modernise the regulatory framework governing clearing and settlement facility licensees within the Australian financial system. This instrument authorises the Reserve Bank of Australia to revoke the Financial Stability Standards for Central Counterparties (FSS 2003.1) and the Financial Stability Standards for Securities Settlement Facilities (FSS 2003.2), which were established under the Corporations Act 2001. The decision to revoke these standards was taken by the Reserve Bank’s Payments System Board following extensive consultation with stakeholders and regulatory bodies, including the Australian Securities and Investment Commission. The objective was to introduce new Financial Stability Standards that better reflect contemporary market conditions and enhance the stability of Australia's financial system.
Scope and Application
The legislation F2012L02539 pertains to the revocation of the Financial Stability Standard for Central Counterparties (FSS 2003.1) and the Financial Stability Standard for Securities Settlement Facilities (FSS 2003.2) by the Reserve Bank of Australia, effective from 29 March 2013. This revocation was authorised under subsection 827D(8) of the Corporations Act 2001, which grants the Reserve Bank the power to determine financial stability standards applicable to clearing and settlement facility licensees. The decision to revoke these standards was made following consultations with various stakeholders, including the Australian Securities and Investment Commission, as required by the Act. The revocation is accompanied by the introduction of new financial stability standards, which will replace the old ones and aim to address contemporary financial stability concerns. The new standards are detailed in the Regulation Impact Statement, which is accessible on the Reserve Bank's website along with related guidance and documents.
Key Provisions
The primary operative sections of the legislation concern the revocation of existing financial stability standards (subsection 827D(8) of the Corporations Act 2001) and the introduction of new financial stability standards (subsection 827D(1) of the Act). Specifically, the Financial Stability Standard for Central Counterparties (FSS 2003.1) and the Financial Stability Standard for Securities Settlement Facilities (FSS 2003.2) were revoked with effect from 29 March 2013, and have been replaced with new standards (FSS 2003.1 and FSS 2003.2). These new standards were determined following a consultation process with stakeholders and the Australian Securities and Investment Commission.
The obligations imposed by this legislation include the requirement for clearing and settlement facility licensees to adhere to the new financial stability standards as determined by the Reserve Bank. These standards are designed to ensure the resilience and stability of the financial system by setting out the minimum requirements that such facilities must meet. Compliance with these standards is essential for maintaining the integrity of the financial markets and protecting the interests of participants in the clearing and settlement processes.
Failure to comply with the new financial stability standards may result in various consequences, including regulatory action by the Reserve Bank or other regulatory bodies. While the legislation itself does not specify detailed penalties, breaches of financial stability standards can lead to enforcement actions that may include fines, public reprimands, or even revocation of the licensee's authority to operate. The maximum penalties for such breaches would typically be determined by the Corporations Act 2001 and related regulations, which can include significant financial penalties and other sanctions depending on the severity and impact of the non-compliance.