Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2)

Administered by Department of the Treasury

Legislation au F1999B00361 Regulations Not in force Legislative Instrument

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Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2) 1999 No. 355

EXPLANATORY STATEMENT

Statutory Rules 1999 No. 355

Issued by the Authority of the Minister for Financial Services and Regulation

Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999

Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2)

Section 23 of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by this Act.

Schedule 8 to the Act provides that regulations may deal with the transition from the application of provisions of the replaced legislation to the application of provisions of various Commonwealth financial sector legislation (paragraph 22(1)(a)).

Replaced legislation includes the Financial Institutions Codes and the Australian Financial Institutions Commission (AFIC) Codes for each State and Territory.

Schedule 8 to the Act also provides that regulations may be made relating to the transition of The Cairns Cooperative Weekly Penny Savings Bank Limited, from the application of the provisions of the Financial Intermediaries Act 1996 of Queensland to the application of various Commonwealth financial sector legislation (paragraph 22(1)(b)).

The Cairns Cooperative Weekly Penny Savings Bank Limited is now known as The Cairns Penny Bank Limited.

Prior to the transfer of the State-based financial institutions (i.e. building societies, credit unions, the Cairns Penny Bank Limited and friendly societies) to the Commonwealth regime on 1 July 1999, the Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999 were made under Schedule 8. Subsequent to making these regulations, two further issues have become apparent.

First, for building societies and credit unions, many of the prudential standards that applied under the AFIC Code were preserved by regulation 12 and are listed in Schedule 1. Subsequent to issuing Schedule 1, it has become apparent that the AFIC Prudential Standard 3.2.8 had been inadvertently omitted. Prudential Standard 3.2.8 relates to the reduction in a society's capital by a building society, and requires the approval of the regulator to do so.

Secondly, under regulation 13 the provisions listed in Schedule 1 only apply to a body that was a FIC body immediately prior to the transfer date.

An FIC body is defined in the Act as a body that is a society, or special services provider, as defined in section 3 of any of the Financial Institutions Codes.

However, prior to the transfer date Cairns Penny Bank Limited operated under the Financial Intermediaries Act 1996 of Queensland rather than one of the Financial Institutions Codes and therefore, is not subject to provisions contained in Schedule 1. It was the intention that only the prudential standards that applied to the Cairns Penny Bank Limited prior to the transfer date be preserved.

The regulations amend Schedule 1 by incorporating Prudential Standard 3.2.8 (for application to building societies) and amend regulations 13 and 14 ensuring that the Cairns Penny Bank Limited is subject to relevant prudential standards and instruments issued pursuant to those standards prior to 1 July 1999.

Details of the regulations appear at Attachment A

The regulations apply retrospectively, effective from the date on which regulations 12-14 came into force (1 July 1999). Retrospectivity is authorised by Schedule 8 to the Act (subitem 22(5)).

ATTACHMENT A

Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2)

Regulation 1 - Name of Regulations

These regulations are the Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2).

Regulation 2 - Commencement

These regulations are taken to have commenced on the commencement of Schedule 4 to the

Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999.

Regulation 3 - Amendment of Financial Sector Reform (Amendment and Transitional Provisions) Regulations 1999

Schedule 1 amends the Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999.

Item - [l] Application of APRA transitional prudential standards

Regulation 13A ensures that items 2, 4, 6 and 7 in Schedule 1 apply to Cairns Penny Bank Limited.

Item - [2] - Application of instruments under APRA transitional prudential standards

Regulation 14A ensures that instruments made under items 2, 4, 6 or 7 in Schedule 1 prior to 1 July 1999 continue to apply to Cairns Penny Bank Limited.

Items [3] - [5] - Activities relating to APRA transitional prudential standards and instruments

These items ensure that particular activities relating to the instruments made under items 2, 4, 6 or 7 apply to Cairns Penny Bank Limited. These activities relate to interpreting, varying, revoking, modifying, inspecting and purchasing the APRA transitional prudential standards and instruments.

Item [61 - Schedule 1

This item inserts former AFIC Code Prudential Standard 3.2.8 into Schedule 1, paragraph (d) of item (1).

 

Overview

The Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2) were enacted to address issues that arose following the transfer of state-based financial institutions to the Commonwealth regime on 1 July 1999. This amending legislation, issued by the Authority of the Minister for Financial Services and Regulation, is aimed at ensuring a smooth transition from state-based to Commonwealth regulation. The primary objective is to rectify oversights in the initial set of regulations and to ensure the proper application of prudential standards to the Cairns Penny Bank Limited. The regulations are retrospective, applying from the date of their original commencement, which aligns with the transition date of 1 July 1999. The policy objective is to maintain regulatory continuity and address any inadvertent omissions in the initial set of transitional provisions to protect the financial stability of the institutions involved.

Scope and Application

The Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2) primarily address transitional provisions for financial institutions transferring from state-based regulatory regimes to the Commonwealth financial sector regulatory framework. These regulations are made under the authority of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999, and apply to financial institutions such as building societies, credit unions, and The Cairns Penny Bank Limited, formerly The Cairns Cooperative Weekly Penny Savings Bank Limited. The regulations aim to ensure a smooth transition by preserving prudential standards that were applicable to these institutions under the previous state-based legislation. Specifically, the regulations amend Schedule 1 to incorporate the omitted AFIC Prudential Standard 3.2.8 and adjust regulations 13 and 14 to ensure that the Cairns Penny Bank Limited is subject to relevant prudential standards and instruments that were applicable before 1 July 1999. These amendments are designed to be retrospective, effective from the date the initial regulations came into force, authorised by Schedule 8 of the Act.

Key Provisions

The main operative sections of the Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2) include Regulation 1, which names the regulations, and Regulation 2, which specifies the commencement date. Regulation 3 details the amendments made to the Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999. The critical amendments are outlined in Schedule 1, where Regulation 13A ensures that certain provisions apply to The Cairns Penny Bank Limited, and Regulation 14A ensures that instruments made under these provisions prior to 1 July 1999 continue to apply to the bank. Additionally, items [3] to [5] cover activities relating to the transitional prudential standards and instruments, and item [6] inserts AFIC Prudential Standard 3.2.8 into Schedule 1. These regulations impose specific obligations on building societies, credit unions, and The Cairns Penny Bank Limited. For building societies and credit unions, the regulations preserve many of the prudential standards that applied under the AFIC Code, as listed in Schedule 1, but also now include the omitted Prudential Standard 3.2.8. For The Cairns Penny Bank Limited, the regulations ensure that only the prudential standards and instruments applicable to it prior to 1 July 1999 are preserved. This includes ensuring that the bank is subject to particular activities such as interpreting, varying, revoking, modifying, inspecting, and purchasing these standards and instruments. The regulations do not explicitly outline specific offences, penalties, or consequences for breach. However, given the context of financial sector legislation and the nature of the transitional provisions, any failure to comply with these regulations could potentially result in regulatory action or enforcement by the relevant authorities, such as the Australian Prudential Regulation Authority (APRA). The exact penalties for non-compliance would depend on the specific nature of the breach and would likely be determined under the broader framework of the financial sector laws and regulations in place at the time.

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Area of Law
Financial Sector Reform
Instrument
Regulation
Concepts
Definitions & Interpretation
Commencement Provisions
Repeal & Amendment
Transitional Provisions

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