Export Finance and Insurance Corporation Amendment Regulations 2002 (No. 1) 2002 No. 36
EXPLANATORY STATEMENT
STATUTORY RULES 2002 No. 36
Issued by the Authority of the Minister for Foreign Affairs
Subject: - Export Finance and Insurance Corporation Act 1991
Export Finance and Insurance Corporation Amendment Regulations 2002 (No. 1)
Section 91 of the Export Finance and Insurance Corporation Act 1991 provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
Subsection 68 (1) of the Act provides that the total contingent liability at any time under insurance contracts entered into and guarantees given by the Export Finance Insurance Corporation (EFIC) shall not exceed the amount prescribed. Similarly, subsection 69 (1) provides that the total amount of money at any one time lent by EFIC and not repaid or written off shall not exceed the amount prescribed.
The purpose of the Regulations is to reallocate EFIC's statutory contingent liability and lending ceilings within the same total ceiling. There is no change to EFIC's maximum statutory ceilings.
The Regulations have increased; EFIC's maximum contingent liabilities for credit insurance (excluding overseas investment insurance) and export finance guarantees under paragraph 68 (1) (a) of the Act from A$3600 million to A$4900 million; and have increased EFIC's maximum contingent liabilities for overseas investment insurance under paragraph 68 (1)(b) of the EFIC Act from A$750 million to A$1150 million. EFIC's loan ceiling under subsection 69 (1) of the EFIC Act has decreased from A$3 500 million to A$1800milllion.
The changes reflect the changing pattern of business within EFIC over recent years. EFIC is increasingly providing a greater volume of export finance guarantees compared to direct export finance loans. Export Finance Guarantees finance exports by providing loan repayment guarantees to banks lending directly to the overseas buyers of Australian exports. In addition, there is an increased demand for Overseas Investment Insurance. Current business projections by EFIC suggest that the former ceiling set in paragraph 68 (1)(a) on credit insurance and export finance guarantees would have restricted business written by EFIC clients (Australian exporters) in 2002.
Details of the Regulations are set out in the Attachment.
The Regulations would commence on gazettal.
Attachment
Regulation 1 provides that the name of these regulations is the Export Finance and Insurance Corporation Amendment Regulations 2002 (No. 1).
Regulation 2 provides that the regulations commence on gazettal.
Regulation 3 provides that Schedule 3 amends the Export Finance and Insurance Corporation Regulations.
Schedule 1 - Amendments.
Item 1 substitutes Regulation 1 to provide that the name of the regulations is the Export Finance and Insurance Corporation Regulations 1991.
Item 2 amends Subregulation 5 (1) by omitting "$3,600,000,000" and Inserting "$4 900 000 000". The effect of this amendment is to increase the statutory ceiling for contingent liabilities for credit insurance (excluding overseas investment insurance) and Export Finance Guarantees.
Item 3 amends Subregulation 5 (2) by omitting "$750,000,000" and inserting "$1 150 000 000". The effect of this amendment is to increase the statutory ceiling for contingent liabilities for Overseas Investment Insurance.
Item 4 amends Subregulation 6 (1) by omitting "$3,500,000,000" and inserting "$1 800 000 000". The effect of this amendment is to reduce the statutory ceiling for lending for Export Finance.
Overview
The Export Finance and Insurance Corporation Amendment Regulations 2002 (No. 1) were enacted to address the need for updating the contingent liability and lending ceilings of the Export Finance Insurance Corporation (EFIC) as stipulated under the Export Finance and Insurance Corporation Act 1991. These regulations were issued by the authority of the Minister for Foreign Affairs and were designed to align EFIC's financial limits with its evolving business patterns. The policy objective was to ensure that EFIC could effectively support Australian exporters without being restricted by outdated financial ceilings. By increasing the ceiling for credit insurance and export finance guarantees, and for overseas investment insurance, while reducing the lending ceiling, the regulations aimed to facilitate EFIC's operations in light of the increasing demand for export finance guarantees and overseas investment insurance. The changes did not affect the overall maximum statutory ceilings but rather redistributed them to better suit the corporation's current and projected needs.
Scope and Application
The Export Finance and Insurance Corporation Amendment Regulations 2002 (No. 1) amends the Export Finance and Insurance Corporation Regulations 1991, which pertain to the operations of the Export Finance Insurance Corporation (EFIC). These regulations apply to EFIC as an entity, regulating its contingent liabilities and lending capacities under the Export Finance and Insurance Corporation Act 1991. The changes reflect the evolving business patterns of EFIC, particularly an increase in export finance guarantees and overseas investment insurance. These regulations increase the statutory ceiling for contingent liabilities for credit insurance (excluding overseas investment insurance) and export finance guarantees from A$3600 million to A$4900 million, and for overseas investment insurance from A$750 million to A$1150 million, while reducing the lending ceiling from A$3500 million to A$1800 million. The regulations maintain the total statutory ceiling but adjust the allocations to better match current business needs. These regulations have a national reach, affecting EFIC's operations throughout Australia and in its international dealings. They do not exclude or exempt any specific persons, entities, industries, conduct, or transactions from their application, and no subordinate instruments extend or restrict their application.
Key Provisions
The Export Finance and Insurance Corporation Amendment Regulations 2002 (No. 1) make specific changes to the financial limits that the Export Finance and Insurance Corporation (EFIC) can manage under the Export Finance and Insurance Corporation Act 1991. These changes are outlined in the regulations and are designed to reflect the evolving business environment of EFIC. Specifically, the regulations increase the maximum contingent liabilities for credit insurance (excluding overseas investment insurance) and export finance guarantees from A$3,600 million to A$4,900 million (Regulation 2, Item 2). Additionally, the ceiling for contingent liabilities for overseas investment insurance is increased from A$750 million to A$1,150 million (Regulation 2, Item 3). Conversely, the lending ceiling for export finance is reduced from A$3,500 million to A$1,800 million (Regulation 2, Item 4).
These regulations impose certain obligations and requirements on EFIC. Primarily, EFIC must ensure that its contingent liabilities and lending do not exceed the newly prescribed limits. This includes maintaining records and reporting to relevant authorities as necessary to demonstrate compliance with these financial ceilings. The increased ceilings for certain types of insurance and guarantees reflect EFIC's need to accommodate the growing demand for these services, while the reduced lending ceiling might be intended to balance the portfolio and manage risk more effectively.
Failure to comply with the provisions of these regulations could result in legal consequences for EFIC. While the explanatory statement does not explicitly detail the penalties for non-compliance, breaches of financial limits under the Export Finance and Insurance Corporation Act 1991 could potentially lead to civil or criminal penalties. Civil penalties might include fines, while criminal penalties could involve imprisonment, depending on the severity and intent of the breach. The precise penalties would be determined based on the specific provisions of the Act and any applicable case law.