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
Overview
The Reserve Bank Regulations Amendment Statutory Rules 1990 were introduced to address the changes in the internal accounting arrangements of the Reserve Bank of Australia (RBA) as mandated by the Banking Legislation Amendment Act 1989. The primary objective was to streamline the financial reporting requirements of the RBA by abolishing the Note Issue Department and the Rural Credits Department, thus eliminating the need for separate financial statements for these entities. This simplification was intended to reduce administrative burdens and align the Bank's financial reporting practices with its reformed operational structure. The changes were authorised under Section 89 of the Reserve Bank Act 1959, which empowers the making of regulations to facilitate the Bank's statutory responsibilities. Consequently, the regulations were amended to reflect the Bank’s unified financial reporting requirements, consisting of a single set of financial statements that encompass all activities of the RBA.
Scope and Application
The Reserve Bank Regulations, made under the Reserve Bank Act 1959, originally prescribed the form of the Reserve Bank of Australia's financial statements for its consolidated activities, central banking business, Note Issue Department, and Rural Credits Department, requiring separate financial statements for each. However, subsequent amendments to the Act through the Banking Legislation Amendment Act 1989 and the Banking Legislation Amendment Act 1986 have simplified the Bank's internal accounting arrangements by abolishing the Note Issue Department and the Rural Credits Department. These changes have led to the consolidation of the Bank's financial statements into one set, encompassing all of its activities. The proposed amendments to the Regulations will reflect these changes by replacing the separate financial statements with a single set of statements and repealing the regulations and forms related to note holdings and types of primary production that might be extended credit by the Rural Credits Department. These changes apply to the Reserve Bank of Australia and any relevant entities, industries, and transactions within its scope. The amendments extend the application of the Act by updating the regulatory framework to reflect the current structure and responsibilities of the Reserve Bank of Australia.
Key Provisions
The main operative sections of this legislation pertain to the amendment of the Reserve Bank Regulations, as authorised under Section 89 of the Reserve Bank Act 1959. The key changes involve the consolidation of the Reserve Bank of Australia's financial statements. Regulation 8, along with Schedule 1, will be amended to replace the separate financial statements for the Bank’s consolidated operations, central banking business, the Note Issue Department (NID), and the Rural Credits Department (RCD) with a single set of financial statements for the Bank. This new set will consist of a balance sheet and a profit and loss statement (Section 89). Furthermore, Regulation 5, which required banks to report their holdings of notes in a prescribed form, will be repealed, as will Form B of Schedule 1 (Section 89). Similarly, Regulation 5A, which outlined the types of primary production that could be extended credit by the RCD, will also be repealed, along with Schedule 2 (Section 89).
The Act imposes specific obligations on the Reserve Bank of Australia and the banks subject to its regulations. The Reserve Bank must now prepare and present a unified set of financial statements encompassing all of its activities, as opposed to separate statements for different departments. This change reflects the abolition of the NID and RCD, resulting from amendments to the Reserve Bank Act. Banks, on the other hand, are no longer required to report their note holdings in a prescribed form or detail primary production credit extensions as previously mandated. These changes aim to simplify the Bank's internal accounting arrangements and reporting obligations.
Breaching the provisions of the amended Reserve Bank Regulations may lead to legal consequences. While the Act does not explicitly outline specific offences or penalties for non-compliance with the new regulations, failure to adhere to the prescribed financial statements could potentially result in civil or administrative actions. The Reserve Bank Act 1959 itself includes provisions for penalties in cases of non-compliance with other regulations, which might be applicable here. The penalties for breaches can vary, but typically include fines or other administrative sanctions as deemed appropriate by the relevant authorities. The exact penalties would depend on the specific nature of the breach and the discretion of the enforcing body.