Overview

The Banking Act 1959 was enacted to regulate banking activities in Australia, ensuring that only authorised entities can conduct banking business. It addresses the critical need to protect the financial system and depositors by granting and revoking authorisations to entities to operate as authorised deposit-taking institutions (ADIs). The Act provides the Australian Prudential Regulation Authority (APRA) with the power to manage these authorisations, including the ability to revoke them when necessary. In this instance, the revocation of Cape Credit Union Limited’s authority to carry on banking business in Australia was executed on 3 May 2018, following an application by the ADI itself under subsection 9A(1) of the Act. The decision was made by Mark Adams, a delegate of APRA, who was satisfied that the revocation would not be contrary to the national interest or the interests of the depositors. This revocation aligns with the policy objective of the Act to safeguard the stability and integrity of the Australian banking sector.

Scope and Application

The Banking Act 1959 governs the revocation of the authority of authorised deposit-taking institutions (ADIs) to carry on banking business in Australia. This Act applies to ADIs, which are defined in subsection 5(1) of the Act, and the revocation of their authority to operate within Australia is a significant regulatory action overseen by the Australian Prudential Regulation Authority (APRA). The scope of the Act extends to entities that are not the Reserve Bank and do not have an existing order under section 11 of the Act exempting them from the requirements of being an ADI. The Act’s jurisdiction is national, applying to all ADIs operating within Australia. The Act allows for the revocation of an ADI's authority if it is satisfied that such revocation would not be contrary to the national interest or the interests of the ADI's depositors. Additionally, the Act imposes penalties on body corporates that carry on banking business without the necessary authorisation, with a maximum penalty of up to 1,000 penalty units for each day the offence continues. The Act also mandates the publication of the revocation notice in the Gazette and allows APRA to use other means it deems appropriate for notifying the public of such regulatory actions.

Key Provisions

The key provisions of this legislative instrument, which pertains to the revocation of an institution's banking authority, are contained in sections 9A(1) and 9A(6) of the Banking Act 1959. Section 9A(1) provides the authority for the Australian Prudential Regulation Authority (APRA) to revoke the banking authority of an authorised deposit-taking institution (ADI) upon its written application, provided that such revocation would not be contrary to the national interest or the interests of the institution's depositors. The authority to revoke is exercised by a delegate of APRA, as demonstrated in the instrument by the signature of Mark Adams, Executive General Manager Specialised Institutions Division, dated 20 June 2018. The Act imposes several obligations on the parties it governs. The most pertinent of these is the requirement for an ADI to apply in writing to APRA for the revocation of its banking authority, as outlined in section 9A(1). Furthermore, APRA must ensure that such a revocation does not contravene the national interest or the interests of the ADI's depositors, as stated in section 9A(1). Additionally, APRA is mandated to publish a copy of the revocation notice in the Gazette and may publish notice of the revocation in any other manner it deems appropriate, as per section 9A(6). The Banking Act 1959 also delineates the consequences for breaches of its provisions. For instance, section 8(1) imposes a penalty on a body corporate that engages in banking business in Australia without being the Reserve Bank, an ADI, or an entity exempt under section 11 of the Act. The penalty for such an offence is a maximum of 200 penalty units, or alternatively, 1,000 penalty units as stipulated in subsection 4B(3) of the Crimes Act 1914. Section 8(2) further classifies this offence as an indictable offence, and section 8(3) stipulates that each day on which the offence persists constitutes a separate offence, including the day of conviction and any subsequent days.