Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)General outline and financial impact
Restrictions on shareholdings
To support new entrants to the financial services market, the 15 per cent ownership restriction applying to insurance companies (life insurance and general insurance companies), Authorised Deposit-taking Institutions (ADIs) - broadly banks, credit unions and building societies, and relevant holding companies under the Financial Sector (Shareholdings) Act 1998 (FSSA) will be increased to 20 per cent. Appropriate safeguards to protect consumers and financial system stability against risks associated with concentrated ownership of financial sector companies are maintained including a fit and proper test.
Date of effect: Royal Assent
Proposal announced: This Schedule partially implements the measure A more accountable and competitive banking system from the 2017-18 Budget.
Financial impact: Nil
Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.1 to 3.11.
Compliance cost impact: Nil
Restricted ADI licences
To encourage greater competition in the banking sector and allow start-up banks to enter the market at an earlier stage than is currently possible, new entrants will be allowed to operate subject to considerable concessions coupled with a time limited restriction on the ADI licence. A key restriction is that the ADI licence will be granted subject to a time limit. While concessions to the prudential framework apply, a Restricted ADI will be subject to further restrictions on their ADI licence in order to limit risk to depositors and financial stability.
Date of effect: Royal Assent.
Proposal announced: In the 2017-18 Budget, the Government announced its support for APRA's proposed licensing review. On 4 May 2018, APRA announced the commencement of its restricted ADI licence framework. This Schedule implements changes required to operationalise that framework.
Financial impact: Nil.
Human rights implications: This Schedule does not any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.12 to 3.18.
Compliance cost impact: Nil.