19 February 1999
Mr John Hall
Managing Director
Austraclear Limited
GPO Box 4606
SYDNEY NSW 2001
Dear Mr Hall,
PAYMENT SYSTEMS AND NETTING ACT 1998 -
APPLICATION FOR APPROVAL OF RTGS SYSTEM
I refer to your application of 27 July 1998 for approval of the Austraclear System as an “approved RTGS system” in terms of the Payment Systems and Netting Act 1998. I also note the subsequent exchange of letters between the Bank and Austraclear in which Austraclear agreed that it will notify the Bank should one of its participants enter external administration.
I am pleased to inform you that, under section 9 of the Act, the Payments System Board of the Reserve Bank has declared the Austraclear System operated by Austraclear Limited to be an approved RTGS system for the purposes of the Act.
This approval is a disallowable instrument under section 46A of the Acts Interpretation Act 1901 and, accordingly, is being tabled before each House of the Commonwealth Parliament for a period of 15 sitting days. Subject to disallowance, the approval will take effect from the date of this letter.
This approval may be reviewed from time to time.
Yours sincerely,
IJ Macfarlane
Governor
Reserve Bank of Australia
Overview
The Payment Systems and Netting Act 1998 was enacted by the Parliament of Australia to address the need for a robust regulatory framework governing payment systems and netting arrangements in the financial sector. This legislation was designed to enhance the efficiency, safety, and soundness of the payment systems in Australia, ensuring that these systems operate smoothly and securely. The Act provides the Reserve Bank of Australia with the authority to oversee and regulate real-time gross settlement (RTGS) systems, which are critical for the timely and final settlement of financial transactions. The policy objective behind the Act is to foster a stable financial system by providing clear legal standards and regulatory oversight for payment systems, thereby reducing systemic risk and promoting public confidence in the financial infrastructure.
The Reserve Bank of Australia, acting through the Payments System Board, has the responsibility of approving RTGS systems under the Act. This process ensures that only those systems meeting the specified standards and criteria are authorised to operate. The approval of the Austraclear System by the Reserve Bank is an example of this regulatory function, aimed at integrating a secure and efficient payment mechanism into the national financial infrastructure. The legislative instrument confirms that the Austraclear System has been declared an approved RTGS system, subject to the disallowance procedure as outlined in the Acts Interpretation Act 1901.
Scope and Application
The Payment Systems and Netting Act 1998 applies to payment systems, including Real Time Gross Settlement (RTGS) systems, and the entities operating these systems within Australia. The Act is a Commonwealth legislation and therefore has a national jurisdictional reach, encompassing all authorised entities involved in the provision of payment services across Australia. It regulates the conduct and transactions of entities that operate payment systems to ensure financial stability and consumer protection. The Act extends its application through subordinate instruments, which may include regulations, guidelines, and standards that further detail operational requirements and compliance measures for approved RTGS systems. These instruments can also address specific exclusions, exemptions, or thresholds relevant to particular entities or circumstances. For instance, certain smaller entities or transactions may be exempt from certain provisions if they meet specified criteria. The Act itself does not specify detailed exclusions but allows for flexibility through its subordinate instruments to cater to the diverse nature of payment systems and the entities involved.
Key Provisions
The Payment Systems and Netting Act 1998, specifically section 9, empowers the Payments System Board of the Reserve Bank of Australia to declare an RTGS (Real-Time Gross Settlement) system as approved. This means that the Austraclear System operated by Austraclear Limited has been formally recognised and approved as an effective means for real-time gross settlement of payments within the Australian financial system. Section 9 is instrumental in ensuring that the systems facilitating such critical financial transactions meet the regulatory standards set forth by the Act.
In approving the Austraclear System, the Reserve Bank has imposed several obligations on Austraclear Limited. These obligations include ensuring the timely and accurate settlement of payments, maintaining the integrity and security of the system, and promptly notifying the Reserve Bank of any significant events such as a participant entering external administration. By complying with these obligations, Austraclear Limited contributes to the stability and reliability of the financial system. The notification requirement, outlined in the correspondence between the Bank and Austraclear, is an example of the kind of ongoing communication and transparency expected under the Act.
Failure to comply with the provisions of the Payment Systems and Netting Act 1998 can result in significant consequences. While the Act itself does not specify detailed penalties for breaches, other relevant legislation and regulations may apply. For example, breaches of financial services laws could lead to fines, imprisonment, or both. Additionally, the Reserve Bank may impose further administrative penalties or take corrective actions against Austraclear Limited if it fails to meet its obligations. The potential civil or criminal liabilities underscore the importance of adhering to the regulatory framework established by the Act.