Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2002 - 2003
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY AMENDMENT BILL 2003
EXPLANATORY MEMORANDUM
(Circulated by authority of the Treasurer,
the Hon Peter
Costello, MP)
Table of Contents
|
1
|
1.1 The Australian Prudential Regulation Authority Amendment Bill 2003 (APRA Amendment Bill) implements the Government’s response to certain recommendations made by the HIH Royal Commissioner, Justice Neville Owen. It implements an enhanced governance structure for the Australian Prudential Regulation Authority (APRA) and responds to a number of other recommendations aimed at enhancing APRA’s ability to share information and co-operate effectively with other financial sector supervisory agencies, law enforcement agencies and overseas regulatory authorities.
1.2 In summary, the effect of the measures is to achieve four related objectives.
1.3 The first is to replace the APRA board (including its Chief Executive Officer and ex officio members) with a full-time executive group comprising at least three and no more than five members. The executive group will carry the responsibility and be accountable for the operation and performance of APRA — this arrangement will further strengthen Australia's existing regulatory framework. APRA will retain its status as an independent statutory authority.
1.4 The second is to refine APRA’s statement of purpose and objectives, clarify APRA’s role in providing advice in support of the Minister’s functions and necessary legislative and policy changes, and apply the same framework for independence from Ministerial direction as exists for office holders in other similar bodies.
1.5 The third is to apply an enhanced disclosure and conflict of interest framework to enhance the integrity of the office of APRA member and apply similar requirements as exist for other office holders of regulatory bodies.
1.6 The final objective is to clarify the operation of provisions which apply to APRA’s release of protected information and protected documents to other agencies in support of their functions and powers. This is one measure intended to facilitate closer cooperation among agencies with interests in bodies that APRA regulates.
|
2
|
2.1 It is not envisaged that this Bill will have a financial impact on the operations of Government.
|
3
|
Clause 1 — Short Title
3.1 This is a formal provision that specifies that the short title of the Bill is the Australian Prudential Regulation Authority Amendment Bill 2003.
Clause 2 — Commencement
3.2 The commencement of the Bill is designed to allow sufficient time for the appointment of the full-time executive group and the updating of APRA’s internal delegations and associated procedures following passage of provisions giving effect to the changed governance structure.
3.3 Schedules 1, 2 and 3 will commence on a single day to be fixed by Proclamation within six months from the day on which Royal Assent is received. Alternatively, if no day is set by proclamation, the sections will automatically commence on the first day after the end of the six month period.
Clause 3 — Schedules of Amendments
3.4 Clause 3 refers to schedules of amendments that this Bill will give effect to. Schedule 1 contains amendments to the Australian Prudential Regulation Authority Act 1998. Schedule 2 contains a number of consequential amendments to other Acts. Schedule 3 contains a number of necessary transitional provisions that ensure that the restructure does not affect APRA’s continuity. Each item within the respective schedules is explained further.
Schedule 1 – Amendments to the Australian Prudential Regulation Authority Act 1998
Items 1-7, 9, 11 & 12 — Definitions
3.5 These items repeal definitions that are no longer required as a result of the change in governance structure from a Chief Executive Officer (CEO) and executive board (including ex officio members) to a full-time executive governing body.
3.6 A number of new definitions are also inserted in line with the changed structure. These include the definitions of APRA member and Deputy Chair.
Item 8 — Definition of financial sector supervisory agency
3.7 This item relocates the definition of 'financial sector supervisory agency'. Previously the term was defined only for the purposes of the secrecy provisions, contained in section 56 of the Act. It is also proposed to use the term in the context of APRA’s cooperation with other agencies (item 16). As the term will be defined for additional purposes, it is considered more appropriate to refer to it in the general definitions section. Item 31 also relates to this item.
Item 10 — Definition of prudential regulation framework law
3.8 This item is similar in effect to item 8, in that it relocates an existing definition. The term 'prudential regulation framework law' is defined as the list of laws under which APRA takes its functions and powers, and additional Acts could be prescribed for this purpose. The definition is required for the purposes of APRA’s advisory powers and the secrecy provisions contained within section 56 of the Act. Items 30, 31, 33, 34, 36, 42, 43 and 45 also relate to this item.
Item 13 — Section 7 (note)
3.9 The section 7 note is amended to clarify that while the Commonwealth Authorities and Companies Act 1997 (CAC Act) applies to APRA, sections 27F to 27K have been disapplied. This is discussed further under item 26.
Items 14 & 15 — Section 8 – Purpose for establishing APRA
3.10 Items 14 and 15 refine APRA’s purpose by clarifying its dual role of regulating bodies in the financial sector and developing the administrative practices and procedures to be applied in performing that regulatory role. These items also clarify that in performing and exercising its functions and powers, APRA is to balance the objectives of financial safety and efficiency, competition, contestability and competitive neutrality.
3.11 The replacement of the word ‘policy’ with the words ‘administrative practices and procedures’ is intended to remove some confusion that has arisen in the past and led to uncertainty about where responsibility resides for formulating the policy behind the prudential regulatory framework. The responsibility for formulating the broader legislative framework policy has always been and remains the responsibility of the Minister.
3.12 APRA’s responsibility for development of administrative practices and procedures includes the development of regulatory and supervisory policies relating to the performance of its role as prudential regulator, including through the making of prudential standards under, for example, the Insurance Act 1973 and the Banking Act 1959.
3.13 APRA’s regulatory role is derived both from this Bill and the other laws of the Commonwealth that provide for prudential regulation. Nothing in this Bill limits APRA’s role as prescribed in those laws. The term 'prudential regulation framework law' is adopted in order to clarify that APRA’s functions and powers also derive from these other laws.
Item 16 — Section 10 – Advice to the Minister
3.14 The effect of this amendment is to clarify the range of matters for which APRA has a role in advising the Minister.
3.15 In addition to advising the Minister if it considers that a body it regulates is in financial difficulty, the new section 10 recognises APRA’s role in advising the Minister in relation to prudential regulation framework laws and policy, and any of the Minister’s functions and powers. It is intended that this cover all functions and powers of the Minister, whether statutory or not, and whether directly related to APRA’s functions and powers or not.
3.15 For example, this would cover advice in relation to the Insurance Acquisitions and Takeovers Act 1991, the Financial Sector (Shareholdings) Act 1998, income tax laws (especially as they relate to insurance companies for example), and the Corporations Act (for example winding up provisions relating to insurance companies).
Item 16 — Section 10A – Cooperation with other agencies
3.16 Section 10A implements a number of the HIH Royal Commissioner’s recommendations on liaison and co-ordination with both domestic and international regulators and other agencies (for example law enforcement agencies).
3.17 Nothing in this section limits APRA’s power to liaise and co-operate with other agencies under either other sections of the APRA Act or other laws of the Commonwealth under which APRA operates.
Item 17 — Directions by Minister respecting APRA policies and priorities
3.18 Item 17 amends the ministerial directions power while maintaining APRA’s strong operational independence. The Minister may, after consultation with APRA, give a direction about policies or priorities that APRA should pursue in exercising its functions or powers. The direction to APRA is to be published in the Gazette and laid before each House of Parliament.
3.19 The Minister is precluded from giving directions about particular cases, ensuring APRA’s independence on operational matters.
3.20 This new power is consistent with directions powers in relation to other statutory agencies, in particular the Australian Securities and Investments Commission.
Item 18 — APRA is a body corporate
3.21 Item 18 removes requirements relating to custody of APRA’s seal in line with contemporary drafting conventions.
Item 19 — Section 15 – Delegation of APRA’s functions or powers by CEO
3.22 Item 19 repeals provisions relating to the CEO’s power to delegate. These are no longer required given the repeal of the statutory position of CEO.
3.23 Item 19 provides for general APRA delegation powers.
Item 20 — Part 3 – APRA membership and other corporate matters
3.24 Item 20 gives effect to the HIH Royal Commissioner’s recommendation that APRA’s existing Board (including CEO and ex officio members) be replaced with a full-time executive group.
3.25 Item 20 also repeals the existing Part 3 of the APRA Act and replaces it with a proposed new Part 3 that covers the membership of the new governing body, the terms and conditions of appointment of APRA members, the conduct of meetings, APRA staff, and requirements relating to disclosure of interests.
Part 3, Division 1 – Membership
3.26 Proposed replacement sections 16 – 19 cover membership of the new governing body.
3.27 Proposed section 16 provides for the appointment of a minimum of three full-time members and a maximum of five members. If more than three members are appointed, the fourth and fifth members may be either full-time or part-time appointments. This provides flexibility in the composition of the governing body.
3.28 Proposed section 17 establishes parameters for the appointment of APRA members and provides that a person may only be appointed if the Minister is satisfied that that person has appropriate knowledge or experience relevant to APRA’s functions and powers. A person may not be appointed if they are a director, officer or employee of a body regulated by APRA or a director, officer or employee of a body operating in the financial sector whose conflicts of interest may prevent them from the proper performance of the functions of the office of APRA member.
3.29 Proposed sections 18 and 19 provide for the appointment of a Chair and Deputy Chair and for acting appointments.
Part 3, Division 2 – Terms and Conditions for APRA members
3.30 Proposed Division 2 sets out the terms and conditions for APRA members, including the terms of office of APRA members, the Chair and Deputy Chair, remuneration and allowance, leave of absence and resignation.
3.31 Proposed section 25 sets out the grounds on which an APRA member may be terminated. In addition to the standard termination provisions for statutory office holders, proposed section 25 provides that the appointment of an APRA member is immediately terminated if the member becomes a director, officer or employee of a body regulated by APRA.
3.32 Proposed section 25 also provides an additional ground for termination where a member becomes a director, officer or employee of a body operating in the financial sector and the Minister considers that the person will be or could be prevented from the proper performance of the function of the office of APRA member because of resulting conflicts of interest.
Part 3, Division 3 – APRA meetings
3.33 Proposed Division 2 sets out various requirements relating to APRA meetings, including the times and place of meetings, quorum requirements, who is to preside at meetings, voting at meetings, conduct of meetings, and resolutions without meetings.
Items 21-25 — Part 4 – APRA staff members
3.34 Items 21-25 amend the existing Part 4 of the APRA Act to reflect the replacement of the position of CEO and the APRA Board.
Item 26 — Part 4A – Disclosure of interests of APRA members, APRA staff members and delegates
3.35 Items 26 inserts a proposed new Part 4A – Disclosure of interests of APRA members, APRA staff members and delegates.
3.36 The new Part 4A provides a robust regime for the disclosure of interests of APRA members, staff members and delegates.
Part 4A, Division 1 – Disclosure of interests of APRA members
3.37 Proposed Division 1 inserts a standing obligation on APRA members to disclose interests as well as an obligation to disclose interests before consideration of a particular matter.
3.38 An APRA member is required to disclose any interest that could conflict with the proper performance of his or her functions, whether direct or indirect, whether pecuniary or not and whether acquired before or after the APRA member’s appointment.
3.39 Interests that must be disclosed include, but are not limited to, agreements or understandings relating to the resumption of business relationships or commencement of new business relationships on cessation of the member, and any severance arrangement or ongoing financial arrangement that takes account of such agreements or understandings. These provisions are modelled on similar requirements in the ASIC Act.
3.40 The proposed section 48B imposes an obligation on members to disclose interests before deciding particular matters.
3.41 Where an APRA member has an interest that could conflict with the proper performance of their function in deciding a particular matter, the member is prohibited from performing that role unless the member has disclosed the interest to each of the other members and each of the other members has consented to the member participating in deciding the matter.
3.42 The Chair is required to provide the Minister with written notice of the interest and the matter and advise the Minister whether the other APRA members have consented.
3.43 Proposed section 48C disapplies the application to APRA members of sections 27F to 27K of the CAC Act. These sections are disapplied given the more onerous disclosure regime contained in the new Part 4A.
Part 4A, Division 2 – Disclosure of interests of APRA staff members and delegates
3.44 Proposed section 48D provides that APRA take reasonable steps to ensure that adequate disclosure of interest requirements apply to APRA staff members and delegates.
Items 27-29 – Financial and taxation matters
3.45 Items 27 – 29 replace references to the Treasurer with references to the Minister in line with contemporary drafting conventions.
Items 30, 31, 33, 34, 36, 42, 43 & 45 — Restructure of section 56
3.46 These items relate to the relocation of the definitions of 'financial sector supervisory agency' and 'prudential regulation framework law' to the general definitions section of the Act. As redrafted, section 56 will refer to these concepts for the purposes of defining the agencies with whom APRA may share information and those laws under which it may gather protected information and protected documents.
Items 32, 37, 41, 47 & 48 — References to APRA’s board and board members
1.1 3.47 These items will replace references to APRA’s board or board members with references to APRA or APRA members as appropriate.
Items 35, 40 & 46 — Disclosure by other agencies
3.48 These items relate to an additional ground of defence that is intended to clarify that other bodies to which APRA is permitted to disclose protected information and protected documents are able to further use that information. In originally disclosing information, it would be necessary for APRA to consider the purposes of disclosure and whether any conditions should be placed upon the subsequent use of the information.
3.49 For example, APRA might impose a condition requiring that a receiving agency first seek APRA’s approval before further disclosing protected information or a protected document if this was necessary in it pursuing its own functions and powers.
Items 38 & 39 – Repeal of note
3.50 This item repeals a note to existing subsection 56(5) in accordance with contemporary drafting conventions. The note referred to APRA’s ability to place conditions on other parties when exercising its powers under section 56. This is evident on the face of the legislation (subsection 56(9) refers).
Item 44 — Disclosure of regulatory action
3.51 This item will extend the scope of the ground of defence currently provided under section 56(7B) in order to allow APRA to make public statements about regulatory action that it has taken or is proposing to take. Within the prudential regulation framework, it is possible that APRA may take regulatory or supervisory action against a body or an individual without there having been an actual breach of the law. Rather, action may be taken for other reasons, and it is important that APRA is able to inform the public of this, as appropriate.
Schedule 2 – Amendment of other Acts
Items 1-23
3.52 In general, these items make consequential amendments to other Acts flowing from the replacement of the APRA Board and CEO with a full-time executive governing body.
3.53 The references to APRA board, APRA board member and APRA Chief Executive Officer have been removed from a range of Acts including the Banking Act 1959, the Financial Corporations (Transfer of Assets and Liabilities) Act 1993, the Financial Sector (Shareholdings) Act 1998, the Financial Sector (Transfers of Business) Act 1999, the Insurance Acquisitions and Takeovers Act 1991, the Insurance Act 1973, the Reserve Bank Act 1959 and the Superannuation (Unclaimed Money and Lost Members) Act 1999. In place of these references, Schedule 2 inserts references to APRA member, APRA staff member or APRA, as appropriate.
Schedule 3 – Transitional provisions
Item 1 – Definitions
3.54 Item 1 contains various definitions used in this Schedule.
Item 2 – APRA’s corporate existence is continued
3.55 Item 2 provides for the continuance of the body corporate that was APRA prior to the commencement of this Bill under the corporate structure provided for by this Bill.
3.56 This item preserves any rights, liabilities and obligations as between APRA and other people that existed prior to the commencement of this Bill. Any things done by or on behalf of APRA or in relation to APRA prior to the commencement of this Bill are not effected by this Bill. This would include, among other things, the appointment of staff and consultants under sections 45(1) and 47(1) of the Act.
3.57 These provisions do not, however, in any way imply that people who were board members or APRA’s Chief Executive Officer continue to hold office after the commencement of this Bill. These people cease to hold office because of the repeal of the provisions under which they were appointed.
Item 3 – Continued protection from liability
3.58 Item 3 provides for the continued application of section 58 to the conduct before the commencement of this Bill of APRA’s Board, board members or an agent of a member of the Board and also covers APRA’s Chief Executive Officer.
Item 4 – Continued effect of certain delegations
3.59 Item 4 provides for the continued effect of various delegations by the CEO in force prior to the commencement of this Bill and of delegations under provisions amended by Schedule 2.
Item 5 – Continued effect of determinations of terms and conditions for staff and consultants
3.60 Item 5 provides for the continued effect of terms and conditions of the appointment of staff and consultants that were in force prior to the commencement of this Bill.
Item 6 – Continued effect of approvals under paragraph 56(5)(b)
3.61 Item 6 provides for the continued effect of approvals in force immediately before the commencement of this Bill under paragraph 56(5)(b).
Item 7 – Continued or extended effect of certain regulations
3.62 Item 7 provides for the continued effect of certain regulations in force before the commencement of this Bill.
Item 8 – Delegations by ASIC to APRA staff members
3.63 Item 8 provides that subsection 102(2A) of the Australian Securities and Investments Commission Act 2001 continues to have effect after the commencement of this Bill as if the reference to the Chief Executive Officer of APRA were a reference to APRA.
3.64 In addition, this item provides that an agreement to a delegation in force under that subsection immediately before the commencement of this Bill continues to have effect as if it were given by APRA.