Commonwealth Numbered Regulations - Explanatory Statements

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FINANCIAL SECTOR REFORM (AMENDMENTS AND TRANSITIONAL PROVISIONS) AMENDMENT REGULATIONS 1999 (NO. 2) 1999 NO. 355

EXPLANATORY STATEMENT

Statutory Rules 1999 No. 355

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

Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999

Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2)

Section 23 of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by this Act.

Schedule 8 to the Act provides that regulations may deal with the transition from the application of provisions of the replaced legislation to the application of provisions of various Commonwealth financial sector legislation (paragraph 22(1)(a)).

Replaced legislation includes the Financial Institutions Codes and the Australian Financial Institutions Commission (AFIC) Codes for each State and Territory.

Schedule 8 to the Act also provides that regulations may be made relating to the transition of The Cairns Cooperative Weekly Penny Savings Bank Limited, from the application of the provisions of the Financial Intermediaries Act 1996 of Queensland to the application of various Commonwealth financial sector legislation (paragraph 22(1)(b)).

The Cairns Cooperative Weekly Penny Savings Bank Limited is now known as The Cairns Penny Bank Limited.

Prior to the transfer of the State-based financial institutions (i.e. building societies, credit unions, the Cairns Penny Bank Limited and friendly societies) to the Commonwealth regime on 1 July 1999, the Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999 were made under Schedule 8. Subsequent to making these regulations, two further issues have become apparent.

First, for building societies and credit unions, many of the prudential standards that applied under the AFIC Code were preserved by regulation 12 and are listed in Schedule 1. Subsequent to issuing Schedule 1, it has become apparent that the AFIC Prudential Standard 3.2.8 had been inadvertently omitted. Prudential Standard 3.2.8 relates to the reduction in a society's capital by a building society, and requires the approval of the regulator to do so.

Secondly, under regulation 13 the provisions listed in Schedule 1 only apply to a body that was a FIC body immediately prior to the transfer date.

An FIC body is defined in the Act as a body that is a society, or special services provider, as defined in section 3 of any of the Financial Institutions Codes.

However, prior to the transfer date Cairns Penny Bank Limited operated under the Financial Intermediaries Act 1996 of Queensland rather than one of the Financial Institutions Codes and therefore, is not subject to provisions contained in Schedule 1. It was the intention that only the prudential standards that applied to the Cairns Penny Bank Limited prior to the transfer date be preserved.

The regulations amend Schedule 1 by incorporating Prudential Standard 3.2.8 (for application to building societies) and amend regulations 13 and 14 ensuring that the Cairns Penny Bank Limited is subject to relevant prudential standards and instruments issued pursuant to those standards prior to 1 July 1999.

Details of the regulations appear at Attachment A

The regulations apply retrospectively, effective from the date on which regulations 12-14 came into force (1 July 1999). Retrospectivity is authorised by Schedule 8 to the Act (subitem 22(5)).

ATTACHMENT A

Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2)

Regulation 1 - Name of Regulations

These regulations are the Financial Sector Reform (Amendments and Transitional Provisions) Amendment Regulations 1999 (No. 2).

Regulation 2 - Commencement

These regulations are taken to have commenced on the commencement of Schedule 4 to the

Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999.

Regulation 3 - Amendment of Financial Sector Reform (Amendment and Transitional Provisions) Regulations 1999

Schedule 1 amends the Financial Sector Reform (Amendments and Transitional Provisions) Regulations 1999.

Item - [l] Application of APRA transitional prudential standards

Regulation 13A ensures that items 2, 4, 6 and 7 in Schedule 1 apply to Cairns Penny Bank Limited.

Item - [2] - Application of instruments under APRA transitional prudential standards

Regulation 14A ensures that instruments made under items 2, 4, 6 or 7 in Schedule 1 prior to 1 July 1999 continue to apply to Cairns Penny Bank Limited.

Items [3] - [5] - Activities relating to APRA transitional prudential standards and instruments

These items ensure that particular activities relating to the instruments made under items 2, 4, 6 or 7 apply to Cairns Penny Bank Limited. These activities relate to interpreting, varying, revoking, modifying, inspecting and purchasing the APRA transitional prudential standards and instruments.

Item [61 - Schedule 1

This item inserts former AFIC Code Prudential Standard 3.2.8 into Schedule 1, paragraph (d) of item (1).


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