Explanatory Statement
Statutory Rules 1990 No
Issued by Authority of the Treasurer
Amendment of the Reserve Bank Regulations
Section 89 of the Reserve Bank Act 1959 (the Act) authorises the making of regulations in connection with the Reserve Bank of Australia carrying out its statutory responsibilities under the Act,
The Regulations made under the Act prescribe the form of the Bank’s financial statements for its consolidated activities, central banking business, the Note Issue Department (NID) and the Rural Credits Department (RCD). The prescribed financial statements consist of a balance sheet or profit and loss statement or both. When the relevant regulations and Schedules were put in place the Act then required that the Bank’s central banking business, NID and RCD be kept as separate areas within the Bank and that all financial statements of the Bank be prescribed by regulation.
The Regulations also reflect the requirements of the Act at the time of their making that returns by banks of the amount of notes held should be in accordance with a form prescribed by regulation as should the various lines of primary production which could be extended credit by the RCD.
Since the abovementioned regulations were made the Banking Legislation Amendment Act 1989 (BLA Act) has amended the Reserve Bank Act with a view to simplifying the Bank’s internal accounting arrangements by abolishing the NID, thus ending the separation of the note and central banking functions of the Bank. To that end the requirement of the Act that the NID be kept separate from other parts of the Bank has been removed along with the mandatory requirement that the net profits of the NID be paid to the Commonwealth. The mandatory requirement of the Act that the net profits of the Bank be paid to the Commonwealth in particular had the potential to provide difficulties on those occasions when the central banking business side of the Bank was unable to generate sufficient profits to maintain adequate cover of
reserves and contingencies. The BLA Act also provided for the removal of reporting obligations for notes, including the obligation that banks should furnish the Bank with returns showing the amount of notes held. Provision was also made in the Banking Legislation Amendment Act 1986 for the RCD of the Bank to be abolished.
The Bank is no longer divided into various parts as a consequence of the amendments to the Act described above, and only one set of financial statements encompassing all of the Bank’s activities is now necessary. Accordingly, it is proposed that Regulation 8 and Schedule 1 be amended so that the separate financial statements for the Bank’s consolidated operations, its central banking business, the NID and the RCD are replaced by one set of financial statements for the Bank consisting of a balance sheet and a profit and loss statement.
As banks are no longer required to report their holdings of notes in a prescribed form as a consequence of the amendments to the Act described above it is also proposed that Regulation 5 be repealed and Form B of Schedule 1 be omitted.
Similarly, the abolition of the RCD removes the need for Regulation 5A, which sets out the types of primary production that might be extended credit by the RCD, and it is proposed that this regulation and Schedule 2 be repealed.
Authority: Section 89 of the Reserve Bank Act 1959