House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

Chapter 1 Additional Deputy Chair of APRA

Outline of chapter

1.1 The chapter explains the amendments to the APRA Act enabling the Governor-General to appoint a second Deputy Chair of APRA.

Context of amendments

1.2 APRA is the prudential regulator of the Australian financial services industry. APRA is an independent Australian Government body, which oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies and most of the superannuation industry.

1.3 APRA is governed by a full-time Executive Group of at least three and no more than five members. The terms and conditions of the appointment of members are set out in the APRA Act, and members are appointed by the Governor-General on the nomination of the relevant Minister. Currently, one member must be appointed Chair and another member may be appointed Deputy Chair.

1.4 To fulfil its role, APRA needs to be able to operate as effectively and efficiently as possible. It needs to be able to have members with the appropriate mix of skills, knowledge and experience necessary for it to fulfil its functions as the financial system evolves.

1.5 The proposed changes will provide greater flexibility in the way in which APRA is governed by its members and enhance the skills and capabilities available to APRA in its members. In so doing, it will improve the ability for the members to be able to manage new or more complex issues.

Summary of new law

1.6 The APRA Act currently provides that one APRA member must be appointed as Chair and another member may be appointed as Deputy Chair.

1.7 This Bill amends the APRA Act to give the Governor-General the discretion to appoint a second APRA Deputy Chair. The Governor-General's existing discretion to not appoint any Deputy Chair is preserved.

1.8 Consistent with the existing requirements, only a full-time member of APRA can be appointed as a Deputy Chair of APRA.

1.9 The Bill also makes amendments to provide operational certainty to APRA in the event that a second Deputy Chair is appointed.

Comparison of key features of new law and current law

Detailed explanation of new law

1.10 Schedule 1 of the Bill amends the APRA Act to provide the Governor-General with the discretion to appoint a second Deputy Chair of APRA. The amendments also provide for the Governor-General to be able to appoint someone who is to be a full-time APRA member, as well as being able to appoint someone who is currently a full-time APRA member, as the Chair or a Deputy Chair of APRA. [Schedule 1, item 3, section 18 of the APRA Act]

1.11 As APRA may now have two Deputy Chairs, existing subsection 18(3), which provides for the Deputy Chair to automatically be acting Chair when the Chair is unavailable, is repealed. [Schedule 1, item 3, section 18 of the APRA Act]

1.12 Subsection 19(2) of the APRA Act continues to provide that the Minister may appoint an APRA member to act as Chair: (a) during a vacancy in the office of Chair, whether or not an appointment has previously been made to the office; or (b) during any period, or during all periods, when the Chair is absent from duty or from Australia, or is, for any reason, unable to perform the functions of his or her office.

1.13 Existing subsection 19(3) of the APRA Act, which allows for the Minister to appoint an APRA member to act as Deputy Chair, is amended to make it clear that the Minister can appoint an APRA member to act as a Deputy Chair when:

•

there are fewer than two persons appointed as a Deputy Chair; or

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a Deputy Chair is absent or acting as the Chair.

[Schedule 1, item 5, subsection 19(3) of the APRA Act]

1.14 Where the Chair is absent from a meeting and there are two Deputy Chairs available to preside at the meeting, the Bill provides that the Chair may nominate one of them to preside. If only one of the Deputy Chairs is available to preside at the meeting, the Bill provides for that Deputy Chair to preside. [Schedule 1, item 8, subsection 29(2) of the APRA Act]

1.15 Where the Chair is absent and there are no Deputy Chairs available for a particular meeting, the Bill preserves the existing requirement for the members present to decide which of them should preside over the meeting. [Schedule 1, item 8, subsection 29(3) of the APRA Act]

Consequential amendments

1.16 As a result of the amendments to provide for APRA to have two Deputy Chairs, a number of references to 'Deputy Chair' have been replaced with a reference to 'a Deputy Chair' so that the provisions continue to operate when a second Deputy Chair is appointed. The provisions amended in this way include:

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subsection 3(1) which provides for the definitions of 'APRA member' and 'Deputy Chair'; [Schedule 1, items 1 and 2, subsection 3(1) of the APRA Act]

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paragraph 19(1)(c) which provides for appointing an acting APRA member. [Schedule 1, item 4, paragraph 19(1)(c) of the APRA Act]

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section 21 which provides for the term of office for the Chair and a Deputy Chair; [Schedule 1, item 6, section 21 of the APRA Act]

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section 24 which provides for the resignation of the Chair or a Deputy Chair; and [Schedule 1, item 7, section 24 of the APRA Act]

Application and transitional provisions

1.17 The amendments apply from the day after the end of the period of 14 days beginning on the day the Bill receives Royal Assent. [Clause 2]

1.18 A transitional provision provides that the amendments in the Bill do not affect any appointments applying immediately before the commencement of the Bill. This ensures that these arrangements are not disturbed until they are subsequently modified, terminated or cease to apply. [Schedule 1, item 9]