Structured Finance Support (Coronavirus Economic Response Package) Rules 2020

Administered by Department of the Treasury

Legislation au F2020L00309 Rules In force Legislative Instrument

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EXPLANATORY STATEMENT

Issued by authority of the Treasurer

Structured Finance Support (Coronavirus Economic Response Package) Act 2020

Structured Finance Support (Coronavirus Economic Response Package) Rules 2020

Subsection 20(1) of the Structured Finance Support (Coronavirus Economic Response Package) Act 2020 (the Act) provides that the Minister may make rules prescribing matters required or permitted by the Act to be prescribed by the rules, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The purpose of the Structured Finance Support (Coronavirus Economic Response Package) Rules 2020 (the Rules) is to prescribe:

•                 a restriction that a first loss security cannot be an authorised debt security under the Act (in addition to the requirements set out in the Act); and

•                 the Australian Office of Financial Management (AOFM) as a listed entity whose officials may be “eligible delegates” for the purposes of the Minister’s delegation powers under the Act.

The Act established the Structured Finance Support (Coronavirus Economic Response) Fund, initially consisting of $15 billion. The Fund enables the Government to ensure continued access for smaller lenders to funding markets impacted by the economic effects of the coronavirus, and to mitigate impacts on competition in consumer and business lending markets resulting from the coronavirus. In particular, the Fund will ensure smaller lenders can maintain access to funding, by the Government making targeted investments in structured finance markets.

The Rules enable the efficient operation of the Fund, by enabling delegation to AOFM officials, who are best placed to make the Fund’s investments. Further, the Rules help to manage risk for the Commonwealth by preventing first loss securities from being invested in as authorised debt securities.

The Australian Office of Financial Management was consulted in the course of the development of the Rules.

Details of the Rules are set out in Attachment A.

The Rules are a legislative instrument for the purposes of the Legislation Act 2003.

The Rules commenced on the day after they were registered on the Federal Register of Legislation.

A statement of Compatibility with Human Rights is at Attachment B.

ATTACHMENT A

Details of the Structured Finance Support (Coronavirus Economic Response Package) Rules 2020

Section 1—Name

Section 1 provides that the name of the Rules is the Structured Finance Support (Coronavirus Economic Response Package) Rules 2020 (the Rules).

Section 2—Commencement

Section 2 provides that the Rules commenced on the day after registration on the Federal Register of Legislation.

Section 3—Authority

Section 3 provides that the Structured Finance Support (Coronavirus Economic Response Package) Act 2020 (the Act) is the enabling legislation under which the Rules are made.

Section 4—Definitions

Section 4 provides definitions of expressions used in the Rules.

Section 5—Authorised debt securities

Section 5 prescribes a restriction on a debt security for it to be an authorised debt security for the purposes of the Act. The restriction is that the debt security must not be a first loss security.

The expression “first loss security” bears its ordinary meaning. First loss securities are securities that do not benefit from any subordination and therefore will be the first to suffer any losses. Preventing first loss securities from being authorised debt securities reduces risk for the Commonwealth, including by ensuring that smaller lenders continue to undertake an appropriate level of risk assessment before extending credit to households or small businesses.

Section 5 was made for the purposes of paragraph 12(4)(d) of the Act. This paragraph enables the Minister to prescribe requirements or restrictions for debt securities to be authorised debt securities, additional to those set out in paragraphs 12(4)(a) to (c) of the Act. Investments of the Fund may be made in authorised debt securities under paragraph 12(1)(a) of the Act.

Section 6—Eligible delegates

Section 6 prescribes the Australian Office of Financial Management (AOFM), enabling the Minister to delegate powers under the Act to AOFM officials. Delegation to AOFM officials will ensure the efficient operation of the Fund, as the AOFM is best placed to make the Fund’s investments.

Section 6 was made for the purposes of subsection 18(2) of the Act. This subsection empowers the Minister to prescribe listed entities to whose officials the Minister may delegate powers and functions under subsection 18(1) of the Act. The AOFM is a listed entity (see clause 2 of Schedule 1 to the Public Governance, Performance and Accountability Rule 2014).


ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Structured Finance Support (Coronavirus Economic Response Package) Rules 2020

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The purpose of this Legislative Instrument is to prescribe:

•                 a restriction that a first loss security cannot be an authorised debt security under the Act (in addition to the requirements set out in the Act); and

•                 the Australian Office of Financial Management (AOFM) as a listed entity, whose officials may be “eligible delegates” for the purposes of the Minister’s delegation powers under the Structured Finance Support (Coronavirus Economic Response Package) Act 2020.

This Legislative Instrument enables the efficient operation of the Structured Finance Support (Coronavirus Economic Response) Fund, by enabling delegation to AOFM officials, who are best placed to make the Fund’s investments. Further, this Legislative Instrument helps to manage risk for the Commonwealth by preventing first loss securities from being invested in as authorised debt securities.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

Overview

The Structured Finance Support (Coronavirus Economic Response Package) Act 2020 was enacted by the Parliament of Australia to address the economic impacts of the coronavirus pandemic. This Act was introduced to ensure continued access for smaller lenders to funding markets and to mitigate competition issues in consumer and business lending markets arising from the pandemic. The Government established the Structured Finance Support (Coronavirus Economic Response) Fund, initially consisting of $15 billion, to facilitate targeted investments in structured finance markets, thereby supporting smaller lenders. The accompanying Structured Finance Support (Coronavirus Economic Response Package) Rules 2020 further enable the efficient operation of the Fund by designating the Australian Office of Financial Management (AOFM) as an entity whose officials can be delegated powers to manage the Fund. Additionally, the Rules restrict first loss securities from being authorised debt securities, thereby reducing the risk for the Commonwealth and encouraging appropriate risk assessments by smaller lenders before extending credit.

Scope and Application

The Structured Finance Support (Coronavirus Economic Response Package) Act 2020, along with the accompanying rules, establishes a framework aimed at supporting the Australian financial markets in the wake of the economic disruptions caused by the coronavirus. The Act applies to the Commonwealth of Australia, and its primary objective is to facilitate continued access to funding for smaller lenders amidst the economic challenges posed by the pandemic. The Act's reach extends to the creation of the Structured Finance Support (Coronavirus Economic Response) Fund, initially endowed with $15 billion, designed to mitigate the impacts on competition in consumer and business lending markets. The Rules, made under the authority of the Act, specify additional requirements and restrictions that complement the legislative framework, including prohibiting first loss securities from being authorised debt securities and identifying the Australian Office of Financial Management as a listed entity eligible for delegation of ministerial powers. The Rules further ensure the efficient operation of the Fund by enabling delegation to AOFM officials, who are deemed best suited to make investment decisions. This legislative instrument is compatible with human rights as it does not impinge upon any of the applicable rights or freedoms recognised in relevant international instruments.

Key Provisions

The Structured Finance Support (Coronavirus Economic Response Package) Rules 2020 (the Rules) were made under the authority of the Structured Finance Support (Coronavirus Economic Response Package) Act 2020 (the Act). These Rules provide specific details to complement the Act, particularly focusing on the management and operation of the Structured Finance Support (Coronavirus Economic Response) Fund. Section 5 of the Rules specifies that first loss securities cannot be authorised debt securities for the purposes of the Act (Section 5). This means that securities that do not benefit from any subordination, and are thus the first to suffer any losses, are excluded from being authorised debt securities. This restriction is intended to mitigate risk for the Commonwealth by ensuring that smaller lenders appropriately assess risk before extending credit to households or small businesses. The Rules also outline obligations and requirements for the operation of the Fund. Under Section 6, the Australian Office of Financial Management (AOFM) is designated as a listed entity, allowing for the delegation of powers under the Act to AOFM officials (Section 6). This delegation is intended to ensure the efficient operation of the Fund, leveraging the AOFM's expertise in making the Fund’s investments. The AOFM, as a listed entity, is well-positioned to manage these investments effectively. Failure to comply with the provisions of the Act and the Rules can result in legal consequences. While the Rules themselves do not detail specific offences or penalties, breaches of the Act could lead to civil or criminal penalties, as outlined in the main Act. The maximum penalties for breaches can vary depending on the specific nature and severity of the offence but could include fines and, in some cases, imprisonment. It is essential for parties governed by these provisions to adhere to the requirements to avoid these potential consequences.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.