Commonwealth Numbered Regulations - Explanatory Statements

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BANKING AMENDMENT REGULATIONS 2000 (NO. 1) 2000 NO. 114

Statutory Rules 2000 No. 114

Issued by the Authority of the Minister for Financial Services and Regulation

Banking Act 1959

Banking Amendment Regulations 2000 (No. 1)

Section 9 of the Banking Act 1959 (the Act) establishes the Australian Prudential Regulation Authority (APRA) as the Statutory Authority responsible for authorising banking business in Australia.

Subsection 71 (1) of the Act provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Subsection 71(3) of the Act provides that the Governor-General shall not make regulations for or in relation to requiring Authorised Deposit-taking Institutions (ADIs) or Non-Operating Holding Companies (NOHCs) to observe requirements in relation to prudential matters except in accordance with the recommendation of the Treasurer.

Subsection 71(4) of the Act provides that before making a recommendation for the purposes of subsection (3), the Treasurer shall consult APRA. The Treasurer has recommended these particular Regulations and has consulted with APRA.

The purpose of the Regulations is to amend the Banking Regulations to prescribe a class of purchased payment facilities as banking business.

The Regulations reflect an agreement reached between the Government, APRA and the Reserve Bank of Australia (RBA) on the need to remove inconsistencies in the framework for the regulation of holders of stored value (HSV) instruments.

The Payment Systems (Regulation) Act 1998 (the PSR Act) states that a holder of the stored value of a purchased payment facility must be either an authorised deposit taking institution (ADI) within the meaning of the Banking Act 1959 or have received authority or exemption from the RBA.

These arrangements have created a dual regulatory structure for HSV instruments in which APRA has responsibility for the supervision of ADI HSV through its regulation of the Banking Act while the RBA has responsibility for supervision of the residual non-ADI HSV value through its power to grant authorisations or exemptions under the PSR Act.

The RBA and APRA have expressed two concerns with this arrangement. The first is that the regulatory framework could potentially create a perception that non-ADI HSV hold a privileged relationship with the RBA. The second is that the framework creates unnecessary duplication within the RBA of the supervisory skills held by APRA. As a result of the changes made following the Financial Systems Inquiry, the RBA has ceded all of its supervisory functions to APRA aside from those that relate to HM

The effect of the Regulations is to require all holders of stored value for purchased payment facilities with deposit like features to obtain authority from APRA under Section 9 of the Banking Act 1959.

Details of the Regulations appear in the Attachment.

The Regulations commence on gazettal.

Attachment

Banking Amendment Regulations 2000 (No. 1)

Regulation 1 - Name of Regulations

These Regulations are the Banking Amendment Regulations 2000 (No. 1)

Regulation 2 - Commencement

These Regulations commence on gazettal.

Regulation 3 - Amendment of Banking Regulations

Schedule 1 amends the Banking Regulations

Item [11 - Name of Regulations

Names the Regulations as the Banking Regulations 1966.

Item [21 - Definitions

Defines the terms applicable in the Regulations.

Item [31 - Banking Business: purchased payment facilities

This item will ensure that a purchased payment facility is determined as banking business and made subject to regulation by the Australian Prudential Regulation Authority (APRA) if it is widely accepted as a means of payment and is redeemable for Australian currency on demand.