EXPLANATORY STATEMENT

Select Legislative Instrument 2010 No. 53

Issued by the authority of the Minister for Financial Services, Superannuation and Corporate Law

 

Banking Act 1959

Banking Amendment Regulations 2010 (No. 1)

 

Subsection 71(1) of the Banking Act 1959 (the Act) provides, in part, that the Governor‑General may make regulations, not inconsistent with the Act, prescribing all matters which by the Act are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.

 

The Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 amended the Act to allow the Australian Prudential Regulation Authority to disregard external support in determining whether a relevant trigger is met for investigating the affairs of an ADI, or appointing a statutory manager to the ADI, under paragraph 13A(1)(b) of the Act.

 

Subsection 13A(1A) of the Act provides that the regulations may specify that a particular form of support for an authorised deposit-taking institution (ADI) is not to be considered external support for the purposes of paragraph 13A(1)(b) of the Act.

 

The Regulations amend the Banking Regulations 1966 to ensure that a form of support that is entered into in the normal course of business is not considered to be external support for the purposes of paragraph 13A(1)(b) of the Act.

 

Examples of external support entered into in the normal course of business could include parent and shareholder support. Examples of support not entered into in the normal course of business could include arrangements such as industry support contracts certified under section 11CB of the Act, or support from the Government, such as the provision of a guarantee over an ADI’s obligations, an indemnity over risks on an ADI’s balance sheet, or an undertaking to provide capital support.

 

A draft of the Regulations and explanatory material was released for public consultation between 19 January 2010 and 16 February 2010.

 

The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

 

The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.