Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008
No. 129, 2008
An Act to provide for an appropriation for the Guarantee Scheme for Large Deposits and Wholesale Funding, and for related purposes
Contents
1 Short title
2 Commencement
3 Definitions
4 Application within and outside Australia
5 Appropriation
6 Borrowing
Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008
No. 129, 2008
An Act to provide for an appropriation for the Guarantee Scheme for Large Deposits and Wholesale Funding, and for related purposes
[Assented to 27 November 2008]
The Parliament of Australia enacts:
1 Short title
This Act may be cited as the Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008.
2 Commencement
This Act commences on the day on which it receives the Royal Assent.
3 Definitions
In this Act:
Deed of Guarantee means the Deed of Guarantee in respect of the Australian Government Guarantee Scheme for Large Deposits and Wholesale Funding, executed on behalf of the Commonwealth on 20 November 2008, as that Deed is in force from time to time.
Scheme Rules means the Scheme Rules identified in the Deed of Guarantee, as those Rules are in force from time to time.
4 Application within and outside Australia
This Act applies both within and outside Australia.
5 Appropriation
The Consolidated Revenue Fund is appropriated for the following purposes:
(a) paying claims under the Deed of Guarantee in accordance with the Scheme Rules;
(b) repaying a borrowing, and paying interest on a borrowing, made under section 6.
6 Borrowing
(1) The Minister may, on behalf of the Commonwealth, borrow money for the purposes of paying claims under the Deed of Guarantee in accordance with the Scheme Rules.
(2) However, a borrowing in accordance with subsection (1) must not be for a period longer than 24 months.
(3) In this section:
borrow includes raise money or obtain credit, whether by dealing in securities or otherwise, but does not include obtain credit in a transaction forming part of the day‑to‑day operations of the Commonwealth.
[Minister’s second reading speech made in—
House of Representatives on 25 November 2008
Senate on 26 November 2008]
Overview
The Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008 was enacted by the Parliament of Australia to address the urgent financial needs arising from the global financial crisis, specifically targeting the stability of large deposits and wholesale funding within the Australian financial sector. This Act was introduced to provide a legal framework for the appropriation of funds necessary to guarantee large deposits and wholesale funding, ensuring the continuity and stability of financial institutions during a period of economic uncertainty. The policy objective was to protect depositors and maintain confidence in the financial system by offering a government guarantee for large deposits and wholesale funding, thereby preventing potential bank runs and financial collapses.
The Act appropriates funds from the Consolidated Revenue Fund for the payment of claims under the Deed of Guarantee in accordance with the Scheme Rules, and allows for borrowing to meet these obligations, with a strict limitation on the borrowing period to no longer than 24 months. This measure was intended to provide a temporary financial support mechanism to stabilise the financial system and protect the broader economy from the adverse effects of the financial crisis.
Scope and Application
The Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008 is a Commonwealth Act that provides for the appropriation of funds from the Consolidated Revenue Fund for specific purposes related to the Guarantee Scheme for Large Deposits and Wholesale Funding. This Act applies both within Australia and internationally, as it aims to ensure the financial stability of institutions that are integral to the Australian economy. The Act allows for the Minister to borrow money, with restrictions on the duration of such borrowings to a maximum of 24 months, for the purpose of paying claims under the Deed of Guarantee in accordance with the Scheme Rules. The Act also specifies that the borrowing does not include credit obtained in the course of the Commonwealth's day-to-day operations, thereby delineating its scope to extraordinary financial measures. The Act is enacted to support the financial stability of large deposits and wholesale funding within the Australian financial system, ensuring that the Commonwealth can respond effectively to financial disruptions.
Key Provisions
The Guarantee Scheme for Large Deposits and Wholesale Funding Appropriation Act 2008 (the "Act") provides for the appropriation of funds from the Consolidated Revenue Fund for specific purposes related to the Australian Government's Guarantee Scheme for Large Deposits and Wholesale Funding. The Act appropriates funds to pay claims under the Deed of Guarantee in accordance with the Scheme Rules (section 5(a)) and to repay borrowings and interest on those borrowings made under section 6 (section 5(b)). The Act also permits the Minister, on behalf of the Commonwealth, to borrow money for the purposes of paying claims under the Deed of Guarantee, provided that the borrowing is not for a period longer than 24 months (section 6(1)-(3)).
The Act imposes certain obligations on the Commonwealth in relation to the appropriation of funds and the borrowing of money. Firstly, it mandates that the Consolidated Revenue Fund be used to pay claims under the Deed of Guarantee and to repay borrowings and interest (section 5). Secondly, it restricts the duration of borrowings to a maximum of 24 months (section 6(2)). These obligations are designed to ensure that the funds are used efficiently and effectively to meet the needs of the Guarantee Scheme.
Breach of the provisions of the Act may result in various civil and criminal consequences. For instance, failure to adhere to the borrowing restrictions outlined in section 6(2) may result in the borrowing being deemed invalid or unenforceable. Additionally, if the funds appropriated under section 5 are misused or misapplied, this could give rise to legal action for recovery of the funds, as well as potential criminal charges under applicable laws. However, the Act itself does not explicitly outline specific penalties for breaches of its provisions. Instead, any penalties or consequences for breaches would likely be determined by the courts or by relevant regulatory authorities, depending on the nature and severity of the breach.