Overview

The Banking Act 1959 governs the regulation of banking institutions in Australia, ensuring that entities carrying on banking business do so with the appropriate authorisation. This legislation was enacted to establish a framework that maintains the stability and integrity of the banking system, protecting the interests of depositors and the broader economy. The revocation of the authority to carry on banking business by the Australian Prudential Regulation Authority (APRA) under this Act serves to ensure that only institutions meeting stringent regulatory standards can operate within the Australian financial system. This action, as exemplified in the revocation of The University Credit Society Limited's banking authority on 27 May 2015, is taken to safeguard the national interest and the interests of depositors, reflecting the policy objective of maintaining a secure and reliable banking environment.

Scope and Application

The Banking Act 1959 applies to authorised deposit-taking institutions (ADIs) and other entities carrying on banking business in Australia. The Act provides the Australian Prudential Regulation Authority (APRA) with the authority to regulate and supervise ADIs to ensure financial stability and protect depositors. The Act's jurisdiction extends to all entities carrying on banking business in Australia, regardless of whether they are incorporated or operating under a different name, with the exception of the Reserve Bank of Australia and entities exempted by a specific order under section 11 of the Act. The revocation of an ADI's authority to carry on banking business is governed by subsection 9A(1) of the Act and involves a written application to APRA, followed by a determination by a delegate of APRA, as illustrated in the revocation of The University Credit Society Limited's authority. Additionally, the Act includes provisions for the publication of revocation notices in the Gazette and potentially other media as deemed appropriate by APRA. The Act also stipulates penalties for non-ADIs engaging in banking business, with the potential for substantial fines.

Key Provisions

The main sections of the legislation concern the revocation of the University Credit Society Limited's (the ADI) authority to carry on banking business in Australia. Under subsection 9A(1) of the Banking Act 1959, the ADI applied in writing to the Australian Prudential Regulation Authority (APRA) to revoke its banking authority, and Keith Chapman, a delegate of APRA, has issued a notice of revocation (subsection 9A(1)) dated 6 August 2015. Keith Chapman is satisfied that the revocation is not contrary to the national interest or the interests of depositors (subsection 9A(1)). The obligations imposed by the Act on the ADI and APRA include the ADI's written application to APRA to revoke its banking authority (subsection 9A(1)), and APRA's requirement to be satisfied that the revocation would not be contrary to the national interest or the interests of depositors (subsection 9A(1)). APRA must also publish a copy of the revocation notice in the Gazette and may choose to publish it in any other way it considers appropriate (subsection 9A(6)). Additionally, the Act requires any body corporate to be an authorised deposit-taking institution or the Reserve Bank to carry on banking business in Australia, with penalties for non-compliance (subsection 8(1)). The Act imposes civil and criminal consequences for breaches. Any body corporate that carries on banking business in Australia without the requisite authorisation commits an offence under subsection 8(1) of the Act, which is an indictable offence. The penalty for such an offence is 200 penalty units, or up to 1,000 penalty units for a body corporate, as per subsection 4B(3) of the Crimes Act 1914. The offence continues for each day the circumstances persist, including the day of conviction or any later day (subsection 8(3)).