Overview

The Banking Act 1959 was enacted to provide a framework for the regulation of banking activities within Australia, ensuring that the financial system remains stable and secure. The Act, administered by the Australian Prudential Regulation Authority (APRA), aims to protect the interests of depositors and maintain confidence in the banking sector. The 2017 revocation of The Royal Bank of Scotland plc’s authority to carry on banking business in Australia under subsection 9A(1) of the Act was a direct response to the bank's application to APRA. This revocation was made on the basis that it would not be contrary to the national interest or the interests of the bank's depositors. The policy objective behind this action was to ensure that only authorised deposit-taking institutions (ADIs) carry out banking business in Australia, thereby safeguarding the integrity and stability of the financial system.

Scope and Application

The Banking Act 1959 applies to authorised deposit-taking institutions (ADIs) in Australia, which include banks, building societies, credit unions, and other entities authorised to carry on banking business. This Act governs the conduct and operations of these institutions to ensure the stability and integrity of the financial system. The scope of the Act includes the regulation of the establishment, management, and winding-up of ADIs, as well as the oversight of their activities to protect depositors and maintain public confidence in the banking sector. The Act applies nationally across Australia, extending its regulatory reach to all ADIs operating within the Commonwealth, states, and territories. The Act provides APRA with the authority to revoke an ADI's authorisation to conduct banking business, as demonstrated in the revocation of The Royal Bank of Scotland plc's authority on 31 August 2017. The Act also imposes penalties for unauthorised conduct, with a maximum penalty of up to 1,000 penalty units for body corporates found in breach. This Act's provisions can be extended or further defined through subordinate instruments, thereby allowing for additional regulations and guidelines to be implemented as necessary.

Key Provisions

The primary sections of the Banking Act 1959 referenced in this Gazette Notice are subsections 9A(1) and 9A(6), which pertain to the revocation of a bank's authority to carry on banking business in Australia, and the requirement for the Australian Prudential Regulation Authority (APRA) to publish the revocation in the Gazette. Under subsection 9A(1), The Royal Bank of Scotland plc applied in writing to APRA to revoke its authority to conduct banking business in Australia. The Notice indicates that the revocation was granted by Louis Serret, a delegate of APRA, who was satisfied that the revocation would not be contrary to the national interest or the interests of the depositors of the bank. The Act imposes several obligations on the ADI and APRA. The ADI must apply in writing to APRA to revoke its banking authority. APRA, in turn, is obligated to consider the application and decide whether the revocation would be in the public interest. Upon deciding that the revocation would not be contrary to the national interest or the interests of depositors, APRA must revoke the authority and publish the revocation in the Gazette. This ensures transparency and compliance with the legislative requirements. The Banking Act 1959 also outlines consequences for non-compliance. Under subsection 8(1), any body corporate that carries on banking business in Australia without the requisite authority is guilty of an offence. This includes any bank that is not the Reserve Bank or an authorised deposit-taking institution, and for which there is no order in force under section 11 of the Act exempting it from this requirement. The maximum penalty for such an offence is 200 penalty units, or alternatively, under subsection 4B(3) of the Crimes Act 1914, a maximum penalty not exceeding 1,000 penalty units for a body corporate. The offence is classified as an indictable offence, and if the unauthorised banking activity continues, the body corporate can be charged for each day the offence persists, including the day of conviction and any subsequent days.