Explanatory Memorandum
(Circulated by authority of the Treasurer, the Honourable Peter Costello MP)23 Schedule 19: Transitional Provisions
Schedule 19 outlines the necessary transitional provisions required to smooth the passage to the new regulatory/legislative framework outlined in this and other Bills attached to the broader package.
Commencement
23.1 Schedule 19 commences on the day on which this Bill receives the Royal Assent.
Part 1 - Transitional provisions relating to amendments of the Banking Act 1959
23.2 The following items will preserve the current authorities and exemptions provided by the Treasurer and the various State Supervisory Authorities (SSAs) as if they were issued by APRA under the new regime. In addition, existing activities commenced by or with RBA, such as applications and investigations, will be continued as if commenced by or with APRA.
23.3 The items will also enable APRA to smooth the transition of prudential regulation for deposit-taking institutions under the State regime to the Banking Act 1959 subject to Ministerial agreement.
23.4 This item will enable the amendments to the Banking Act to commence with the commencement of APRA.
23.5 This item will ensure that authorities to carry on banking business made under subsections 9(1) and 9(3) of the Banking Act prior to the commencement of APRA Act are preserved and these authorities will be treated identically to subsection 9(3) authorities under the amended Act.
23.6 These items will enable applications to the Treasurer under subsection 9(3) received before the commencement of APRA to be processed by APRA and require APRA, rather than the Treasurer, to fulfil any undischarged publication obligations with respect to authorities under section 9.
23.7 This item will enable APRA to transfer building societies and credit unions regulated under the Financial Institutions Code (FIC) to the Commonwealth scheme without these bodies having to apply under subsection 9(3) of the Banking Act 1959. APRA will have the power to make a determination for an individual FIC body or class of bodies and may subject the authorities to the same, additional, varied or new conditions. These determinations will be disallowable instruments and will be published in the Gazette.
23.8 APRA will not be able to make a determination unless the Treasurer and the State or Territory Minister responsible for the administration of that FIC have agreed that the body or class of bodies should be covered by the amended Banking Act 1959. This process will be consistent with facilitating the efficient transferral of prudential regulation for building societies and credit unions to the Commonwealth upon agreement of the relevant governments.
23.9 Until determinations are made FIC bodies may be provided with exemptions from the application of the Banking Act 1959 under section 11.
23.10 This item will preserve all existing exemption orders made by the Treasurer as if they were exemption orders made under the amended legislation. This transitional provision does not however preclude the possibility that these exemptions may be reviewed by APRA as the circumstances of these institutions change.
23.11 This item will deem approvals received from the Governor of the RBA for foreign banks to accept deposits from persons in Australia to have been made by APRA under subsection 11E(2).
23.11 Item 8 explains how the RBA's role in depositor protection matters is either transferred to APRA or lapses. If:
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- an institution is obliged to provide information to the RBA, that information should be supplied to APRA;
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- the RBA has appointed an investigator that appointment shall continue as if the appointment had been made by APRA;
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- the RBA has assumed control of an institution's business, that control will be transferred to APRA (and regulations may provide for any unforseen complications associated with such a transfer);
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- a bank had applied to the Federal Court under subsection 14(6) of the old Act to end RBA control of that bank such proceedings will lapse because, under the new reforms, the statutory manager replaces the bank's board and so is not separate from the bank;
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- the RBA is under an obligation to publish a notice of a matter, the discharge of that obligation will fall to APRA; and
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- if the RBA has authorised a bank to hold assets of a value less than its liabilities, that authorisation shall continue as if it were an authorisation made by APRA.
23.12 In addition, section 15 of the old Act, relating to indemnities, will continue to have effect (despite being repealed) in relation to things done or not done before that commencement.
23.13 This item will preserve the effect of any instruments made with respect to non-callable deposits under the old legislation and will extend the coverage of NCDs from banks to authorised deposittaking institutions.
23.14 This item will provide that when the non-callable deposit provisions in Division 3 are repealed on a date specified by Proclamation (rather than on the date of APRA commencement) any ADI with a NCD account held with the RBA will be repaid these funds as soon as practicable.
23.15 These items will continue the effect of any regulations in force with respect to the control of interest rates under section 50 and the collection and publication of information under Part VI of the old legislation as if these regulations were made after the commencement of APRA. In addition, these regulations will be applied to ADIs in the same way as they covered banks.
23.16 This item will deem any investigator appointed by the RBA and still undertaking an investigation pursuant to section 61 to have effect as if it were an appointment by APRA under the amended Act.
23.17 This item will require any bank or person that was obliged to provide information to the RBA under section 62 prior to the commencement of APRA to provide this information to APRA.
23.18 This item preserves the continuity of an order relating to RBA control of a bank by ensuring that it has effect as if it had authorised APRA. Similarly, the exercise of control is transferred to APRA (and regulations may provide for any unforeseen complications associated with such a transfer).
23.19 This item will preserve the existing consents received from the Treasurer for the use of the word "bank" or bank-related words by financial businesses prior to the commencement of APRA. Any conditions attached to these consents will be taken to be conditions applying under section 66 of the amended Act.
23.20 This item will enable financial institutions that were authorised to carry on banking business in Australia under subsection 9(3) of the old Act to be taken as having received consent from APRA to use the word "bank" under the amended section 66. This provision will prevent these institutions from having to apply for consent to use the word bank.
23.21 This item will preserve the existing consents received from the Treasurer for the establishment or maintenance of representative offices of overseas banks prior to the commencement of APRA. Any conditions attached to this consent will be taken to be conditions applying under section 67 of the amended Act.
23.22 This item preserves existing regulations made under section71 of the old Act and replaces references to the RBA and banks with APRA and ADIs respectively as far as practicable.
Part 2 - Transitional provisions relating to amendments of the Financial Corporations Act 1974
23.23 This part preserves the list of registered corporation, exemptions and determinations made under the Financial Corporations Act 1974 prior to the commencement of APRA.
23.24 This item will insert definitions of the old and amended Act which are effectively pre and post the commencement of APRA.
23.25 Exemptions or determinations that were in force immediately prior to APRA commencement will continue to have effect.
23.26 The list of categories of registered corporations prepared by the Treasurer will continue to have effect as if the Governor of the RBA had prepared the list. Any undischarged obligations of the Treasurer will be assumed by the Governor of the RBA. In addition, any determination in force or request under section 10 will continue to have effect.
23.27 Any exemption on furnishing of statistics made by the Treasurer under subsection 11(14) will continue to have effect under the amended Act.
Part 3 - Transitional Provisions Relating to the Establishment of APRA and the Repeal of the Insurance and Superannuation Commissioner Act 1987.
23.28 These provisions will come into effect with the commencement of the Australian Prudential Regulation Authority Act 1998.
23.29 This schedule essentially provides for the transfer of staff from the Reserve Bank of Australia (RBA) and the Insurance and Superannuation Commission (ISC) to APRA and the transfer, as appropriate, of the assets and liabilities of the ISC to APRA or Australian Securities and Investments Commission (ASIC).
23.30 This item provides various definitions that are used in this schedule.
Item 25 - Transfer of Staff from the Reserve Bank
23.31 This item provides for the transfer of specified staff from the RBA to APRA. A determination transferring staff from the RBA will only occur following consultation between both APRA's Chief Executive Officer (CEO) and the Governor of the Reserve Bank as it would not be appropriate for either the RBA Governor or the CEO of APRA to unilaterally determine who is to become an APRA employee. The 'consultation' approach provides a balance between the respective employment interests and obligations of the RBA and APRA.
23.32 As Commonwealth employees, separate transfer provisions for ISC staff are not required. ISC staff will be transferred under section 81C of the Public Service Act 1922 and their accrued rights and entitlements will be protected under the Part IV mobility provisions of the same Act.
Item 26 - Terms and conditions
23.33 This item is essentially designed to protect the interests of RBA staff transferring across to APRA. While APRA may vary the terms and conditions of its employees, this provision will ensure that any revised terms and conditions relating to remuneration are no less favourable, as a whole, to that which the employees had enjoyed immediately before they transferred across to APRA.
23.34 Sub-item (4) is designed to preclude any RBA staff member taking redundancy benefits from the RBA before taking up a position with APRA.
Item 27 - Statement of Accrued Benefits
23.35 This item is included to ensure that RBA employees transferring across to APRA and APRA management are fully aware of RBA staff accrued entitlements before they become APRA employees.
23.36 This item provides for the Treasurer to declare certain specified assets of the ISC to be those of vest in APRA or ASIC. As the ISC is not a separate legal entity from the Commonwealth, it is necessary to refer to 'the Commonwealth' when talking about the assets and liabilities of the ISC in this item.
Item 29 - Transfer of liabilities
23.37 This item provides for a similar arrangement to that under Item 28, but in this case it addresses liabilities rather than assets.
23.38 To remove any doubt that may exist, this item explicitly provides for the transfer of records that relate to the functions of APRA or ASIC to APRA or ASIC.
Item 31 - Exemption from stamp duty and other taxes
23.39 This item provides for an exemption from Commonwealth, State and Territory taxes of matters arising out of the transfer of assets and liabilities to APRA or ASIC.
23.40 This item provides for the Treasurer to delegate any or all of his powers under this Division to an officer of the Treasury Department.
Division 4
23.41 This Division facilitates the transfer of roles to ASIC and APRA. The items provide for the continued operation and validity of instruments made by the Insurance and Superannuation Commissioner and for the substitution of APRA and/or ASIC as parties to legal proceedings in which the ISC was a party.
23.42 Provisions of this type are not required to facilitate the transfer of functions and powers from the Australian Securities Commission to ASIC because they are the same legal entity and references to the Australian Securities Commission will be taken to be references to ASIC as appropriate by virtue of interpretation provisions (see, in particular, Item 34 of Schedule 1).
23.43 This item defines a number of terms used in this Part.
"commencement" means the date of commencement of the legislation which repeals the Insurance and Superannuation Commissioner Act 1987 (see Schedule 11).
23.44 These items deal with the continued effect of instruments made or issued by the Insurance and Superannuation Commissioner under Acts which, under the proposed arrangements following the cessation of the ISC, will be administered by ASIC and/or APRA. Which regulator is responsible for administering provisions of particular Acts following the cessation of the ISC is determined by items in the other Schedules to this Bill.
23.45 Instruments made by the Insurance and Superannuation Commission that, under the new administrative scheme for those Acts, could be made by APRA and/or ASIC, continue in force as if they were made by the appropriate regulator under the new administrative scheme.
23.46 Instruments which were made by the Insurance and Superannuation Commission to have effect for a limited period will only continue in force under the new arrangements until the expiration of that period.
23.47 The items deal with those instruments made or issued by the Insurance and Superannuation Commissioner under those Acts which, under the proposed administrative scheme following the cessation of the ISC, will be administered by APRA; those which will be administered by ASIC; and those under which both regulators will perform roles.
Item 36 - Proceedings etc by or against the ISC
23.48 This item provides for the substitution of the responsible agency (ASIC and/or APRA) for the Insurance and Superannuation Commissioner as a party to proceedings in court or tribunal proceedings.
23.48 To the extent that a proceeding in which the Insurance and Superannuation Commissioner was a party relates to a function which is the responsibility of APRA under the new administrative scheme, APRA is substituted as a party. Similarly, to the extent that a proceeding in which the Insurance and Superannuation Commissioner was a party relates to a function which is the responsibility of ASIC under the new administrative scheme, ASIC is substituted as a party.
23.49 The item does not alter the powers of a court or tribunal might otherwise have to make orders or give directions about whether APRA and/or ASIC continue as a party to proceedings, or the rights in the proceeding of any of the parties.
Item 37 Continued operation of Part IX of the Insurance Act
23.50 This item provides for the continued operation of Part IX of the Insurance Act, despite its repeal in Schedule 9, for bodies corporate to which it applied immediately before the commencement of APRA.
Part 4 - Transitional provisions relating to amendments of the Reserve Bank Act 1959
23.51 This item deals with interpretations of the phrases 'amended Act', 'APRA commencement' and 'old Act'. The 'old Act' is that which stands before the amendments in Schedule 14 take effect.
23.52 This item outlines the transitional arrangements in the case that there are 2 Deputy Governors of the RBA at the time that APRA is established (and the number of deputy governor positions is reduced to one). The provision will permit the persons occupying those positions to continue under the provisions of the old Act. However, once one of the deputy governor positions is vacated, the Act will take effect with one deputy governor.
23.53 This item ensures that the terms of incumbent RBA Board members continues to the presently scheduled termination date despite the repeal of subsection 14(5) of the RBA Act.
23.54 This item provides that the repeal of section 81 of the RBA Act, where it relates to investigations on prudential matters, should not have any impact on investigations that are currently being undertaken. The RBA will be required to report on such investigations up to the date of transfer to APRA.
Part 5 - Transitional provisions relating to the Payment Systems (Regulation) Act 1998.
23.55 This item ensures that all corporations that are the holders of the stored value of a purchased payment facilities within a class of purchased payment facilities are treated under the Act as if they had been granted an authority under proposed section 23 of the Payment Systems (Regulation) Bill 1998. This provision ensures that existing holders of the stored value do not breach the provisions of that Bill upon its commencement.
Part 6 - Transitional provisions relating to levies
23.56 This Part allows for transitional arrangements relating to levies to be dealt with in regulations. This will remove the possibility of a leviable entity paying levies under both the existing arrangements and the proposed arrangements.
Part 7 - Regulations dealing with transitional matters
23.57 Items 44 and 45 provide that the Governor-General should be given the power to make regulations relating to other transitional matters arising as a result of the amendments and repeals included in this bill.