Banking Act 1959
Part II
-
Provisions relating to the carrying on of banking business
Division 1BA
-
APRA's power to issue directions
Subdivision A
-
Directions other than to enforce certified industry support contracts
SECTION 11CA
APRA may give directions in certain circumstances
(1)
APRA may give a body corporate that is an ADI or an authorised NOHC a direction of a kind specified in subsection (2) if APRA has reason to believe that:
(a) the body corporate has contravened a provision of:
(b) the body corporate has contravened a prudential requirement regulation or a prudential standard; or
(c) the body corporate is likely to contravene this Act, a prudential requirement regulation, a prudential standard or the Financial Sector (Collection of Data) Act 2001 , and the direction is reasonably necessary for one or more prudential matters relating to the body corporate; or
(d) the body corporate has contravened a condition or direction under this Act or the Financial Sector (Collection of Data) Act 2001 ; or
(e) the direction is necessary in the interests of:
(f) the body corporate is, or is about to become, unable to meet its liabilities; or
(g) there is, or there might be, a material risk to the security of the body corporate ' s assets; or
(h) there has been, or there might be, a material deterioration in the body corporate ' s financial condition; or
(i) the body corporate is conducting its affairs in an improper or financially unsound way; or
(j) the failure to issue a direction would materially prejudice the interests of:
(k) the body corporate is conducting its affairs in a way that may cause or promote instability in the Australian financial system.
(1AA)
APRA may give a body corporate that is an ADI or is an authorised NOHC a direction of a kind specified in subsection (2) if APRA has reason to believe that:
(a) a subsidiary of the body corporate has contravened a provision of:
(b) a subsidiary of the body corporate has contravened a prudential requirement regulation or a prudential standard; or
(c) a subsidiary of the body corporate is likely to contravene this Act, a prudential requirement regulation, a prudential standard or the Financial Sector (Collection of Data) Act 2001 ; or
(d) the direction is in respect of a subsidiary of the body corporate and is necessary in the interests of:
(e) a subsidiary of the body corporate is, or is about to become, unable to meet the subsidiary ' s liabilities; or
(f) there is, or there might be, a material risk to the security of the assets of a subsidiary of the body corporate; or
(g) there has been, or there might be, a material deterioration in the financial condition of a subsidiary of the body corporate; or
(h) a subsidiary of the body corporate is conducting the subsidiary ' s affairs in an improper or financially unsound way; or
(j) a subsidiary of the body corporate is conducting the subsidiary ' s affairs in a way that may cause or promote instability in the Australian financial system; or
(k) a subsidiary of the body corporate is conducting the subsidiary ' s affairs in a way that may cause it to be unable to continue to supply services to:
(l) the direction is in respect of a subsidiary of the body corporate and the failure to issue a direction would materially prejudice the interests of:
(1AB)
However, APRA can only make a direction as a result of a ground referred to in paragraph (1AA)(a), (b), (c), (e), (f), (g), (h) or (k) if APRA considers that the direction is reasonably necessary for one or more prudential matters relating to the body corporate.
(1AC)
APRA may give a body corporate that is a subsidiary of an ADI or of an authorised NOHC a direction of a kind specified in subsection (2) if:
(a) APRA has given the ADI or authorised NOHC a direction under subsection (1AA) because one or more of the grounds referred to in that subsection have been satisfied in respect of the subsidiary; or
(b) APRA may give the ADI or authorised NOHC a direction under subsection (1AA) because one or more of the grounds referred to in that subsection have been satisfied in respect of the subsidiary.
(1AD)
APRA cannot give a direction under subsection (1AC) to a body corporate of a kind specified in regulations (if any) made for the purposes of this subsection.
(1AE)
Subsections (1), (1AA) and (1AC) do not limit each other.
(1A)
The direction must:
(a) be given by notice in writing to the body corporate; and
(b) specify:
(1B)
In deciding whether to give a direction under subsection (1), (1AA) or (1AC) to a body corporate, APRA may disregard any external support for the body corporate.
(1C)
The regulations may specify that a particular form of support is not external support for the purposes of subsection (1B).
(2)
The kinds of direction that the body corporate may be given are directions to do, or to cause a body corporate that is its subsidiary to do, any one or more of the following:
(aa) to comply with the whole or a part of:
(ab) to comply with the whole or a part of a condition or direction referred to in paragraph (1)(d) .
(a) to comply with the whole or a part of a prudential requirement regulation or a prudential standard;
(b) to order an audit of the affairs of the body corporate, at the expense of the body corporate, by an auditor chosen by APRA;
(c) to remove a director or senior manager of the body corporate from office;
(d) to ensure a director or senior manager of the body corporate does not take part in the management or conduct of the business of the body corporate except as permitted by APRA;
(e) to appoint a person or persons as a director or senior manager of the body corporate for such term as APRA directs;
(f) to remove any auditor of the body corporate from office and appoint another auditor to hold office for such term as APRA directs;
(g) not to give any financial accommodation to any person;
(h) not to accept the deposit of any amount;
(i) not to borrow any amount;
(j) not to accept any payment on account of share capital, except payments in respect of calls that fell due before the direction was given;
(k) not to repay any amount paid on shares;
(l) not to pay a dividend on any shares;
(m) not to repay any money on deposit or advance;
(n) not to pay or transfer any amount or asset to any person, or create an obligation (contingent or otherwise) to do so;
(o) not to undertake any financial obligation (contingent or otherwise) on behalf of any other person;
(p) to make changes to the body corporate ' s systems, business practices or operations;
(q) to reconstruct, amalgamate or otherwise alter all or part of any of the following:
(r) to do, or to refrain from doing, anything else in relation to the affairs of the body corporate.
(2AA)
However, APRA must not direct, or give a direction that would cause or require, a covered bond special purpose vehicle to:
(a) deal, or not deal, with an asset to the extent that the asset secures covered bond liabilities of an ADI; or
(b) make a payment, or not make a payment, in relation to a covered bond liability of an ADI.
(2A)
Without limiting the generality of subsection (2), a direction referred to in a paragraph of that subsection may:
(a) deal with some only of the matters referred to in that paragraph; or
(b) deal with a particular class or particular classes of those matters; or
(c) make different provision with respect to different matters or different classes of matters.
(2AAA)
The kinds of direction that may be given as mentioned in subsection (2) are not limited by any other provision in this Part (apart from subsection (2AA)).
(2AAB)
The kinds of direction that may be given as mentioned in a particular paragraph of subsection (2) are not limited by any other paragraph of that subsection.
(2B)
Without limiting the generality of paragraph (2)(r), a direction under that paragraph to a foreign ADI may be any one or more of the following:
(a) a direction that the ADI act in a way so as to ensure that:
(b) a direction that the ADI not act in a way that has the result that:
(3)
The direction may deal with the time by which, or period during which, it is to be complied with.
(4)
The body corporate has power to comply with the direction despite anything in its constitution or any contract or arrangement to which it is a party.
(4A)
If the direction requires the body corporate to cause a subsidiary to do, or to refrain from doing, an act or thing:
(a) the body corporate has power to cause the subsidiary to do, or to refrain from doing, the act or thing; and
(b) the subsidiary has power to do, or to refrain from doing, the act or thing;
(4B)
APRA may, by notice in writing to the body corporate, vary the direction if, at the time of the variation, it considers that the variation is necessary and appropriate.
(5)
The direction has effect until APRA revokes it by notice in writing to the body corporate. APRA may revoke the direction if, at the time of revocation, it considers that the direction is no longer necessary or appropriate.
(5A)
Part VI applies to a decision to give a direction:
(a) under subsection (1) as a result of the ground referred to in paragraph (1)(a), (b), (c), (d) or (e); or
(b) under subsection (1AA) as a result of the ground referred to in paragraph (1AA)(a), (b), (c) or (d); or
(c) under subsection (1AC) as a result of the ground referred to in paragraph (1AC)(a) or (b), to the extent that the paragraph relates to a ground referred to in paragraph (1AA)(a), (b), (c) or (d).
(6)
In this section, director has the same meaning as it has in the Corporations Act 2001 , and the affairs of a body corporate include those set out in section 53 of that Act.
APRA may give a body corporate that is an ADI or an authorised NOHC a direction of a kind specified in subsection (2) if APRA has reason to believe that:
(a) the body corporate has contravened a provision of:
(i) this Act; or
(ii) the Financial Sector (Collection of Data) Act 2001 ; or
(iii) (Repealed by No 70 of 2015)
(b) the body corporate has contravened a prudential requirement regulation or a prudential standard; or
(c) the body corporate is likely to contravene this Act, a prudential requirement regulation, a prudential standard or the Financial Sector (Collection of Data) Act 2001 , and the direction is reasonably necessary for one or more prudential matters relating to the body corporate; or
(d) the body corporate has contravened a condition or direction under this Act or the Financial Sector (Collection of Data) Act 2001 ; or
(e) the direction is necessary in the interests of:
(i) if the body corporate is an ADI - depositors of the ADI; or
(ii) if the body corporate is an authorised NOHC - depositors of any ADI that is a subsidiary of the NOHC; or
(f) the body corporate is, or is about to become, unable to meet its liabilities; or
(g) there is, or there might be, a material risk to the security of the body corporate ' s assets; or
(h) there has been, or there might be, a material deterioration in the body corporate ' s financial condition; or
(i) the body corporate is conducting its affairs in an improper or financially unsound way; or
(j) the failure to issue a direction would materially prejudice the interests of:
(i) if the body corporate is an ADI - depositors of the ADI; or
(ii) if the body corporate is an authorised NOHC - depositors of any ADI that is a subsidiary of the NOHC; or
(k) the body corporate is conducting its affairs in a way that may cause or promote instability in the Australian financial system.
View history note
Hide history note(1AA)
APRA may give a body corporate that is an ADI or is an authorised NOHC a direction of a kind specified in subsection (2) if APRA has reason to believe that:
(a) a subsidiary of the body corporate has contravened a provision of:
(i) this Act; or
(ii) the Financial Sector (Collection of Data) Act 2001 ; or
(b) a subsidiary of the body corporate has contravened a prudential requirement regulation or a prudential standard; or
(c) a subsidiary of the body corporate is likely to contravene this Act, a prudential requirement regulation, a prudential standard or the Financial Sector (Collection of Data) Act 2001 ; or
(d) the direction is in respect of a subsidiary of the body corporate and is necessary in the interests of:
(i) if the body corporate is an ADI - depositors of the ADI; or
(ii) if the body corporate is an authorised NOHC - depositors of any ADI that is a subsidiary of the NOHC; or
(e) a subsidiary of the body corporate is, or is about to become, unable to meet the subsidiary ' s liabilities; or
(f) there is, or there might be, a material risk to the security of the assets of a subsidiary of the body corporate; or
(g) there has been, or there might be, a material deterioration in the financial condition of a subsidiary of the body corporate; or
(h) a subsidiary of the body corporate is conducting the subsidiary ' s affairs in an improper or financially unsound way; or
(j) a subsidiary of the body corporate is conducting the subsidiary ' s affairs in a way that may cause or promote instability in the Australian financial system; or
(k) a subsidiary of the body corporate is conducting the subsidiary ' s affairs in a way that may cause it to be unable to continue to supply services to:
(i) if the body corporate is an ADI - the ADI; or
(ii) if the body corporate is an authorised NOHC - any ADI that is a subsidiary of the NOHC; or
(l) the direction is in respect of a subsidiary of the body corporate and the failure to issue a direction would materially prejudice the interests of:
(i) if the body corporate is an ADI - depositors of the ADI; or
(ii) if the body corporate is an authorised NOHC - depositors of any ADI that is a subsidiary of the NOHC.
(1AB)
However, APRA can only make a direction as a result of a ground referred to in paragraph (1AA)(a), (b), (c), (e), (f), (g), (h) or (k) if APRA considers that the direction is reasonably necessary for one or more prudential matters relating to the body corporate.
(1AC)
APRA may give a body corporate that is a subsidiary of an ADI or of an authorised NOHC a direction of a kind specified in subsection (2) if:
(a) APRA has given the ADI or authorised NOHC a direction under subsection (1AA) because one or more of the grounds referred to in that subsection have been satisfied in respect of the subsidiary; or
(b) APRA may give the ADI or authorised NOHC a direction under subsection (1AA) because one or more of the grounds referred to in that subsection have been satisfied in respect of the subsidiary.
(1AD)
APRA cannot give a direction under subsection (1AC) to a body corporate of a kind specified in regulations (if any) made for the purposes of this subsection.
(1AE)
Subsections (1), (1AA) and (1AC) do not limit each other.
(1A)
The direction must:
(a) be given by notice in writing to the body corporate; and
(b) specify:
(i) in the case of a direction under subsection (1AC) - the ground referred to in subsection (1AA) as a result of which the direction is given; or
(ii) otherwise - the ground referred to in subsection (1) or (1AA) as a result of which the direction is given.
(1B)
In deciding whether to give a direction under subsection (1), (1AA) or (1AC) to a body corporate, APRA may disregard any external support for the body corporate.
(1C)
The regulations may specify that a particular form of support is not external support for the purposes of subsection (1B).
(2)
The kinds of direction that the body corporate may be given are directions to do, or to cause a body corporate that is its subsidiary to do, any one or more of the following:
(aa) to comply with the whole or a part of:
(i) this Act; or
(ii) the Financial Sector (Collection of Data) Act 2001 ;
(iii) (Repealed by No 70 of 2015)
(ab) to comply with the whole or a part of a condition or direction referred to in paragraph (1)(d) .
(a) to comply with the whole or a part of a prudential requirement regulation or a prudential standard;
(b) to order an audit of the affairs of the body corporate, at the expense of the body corporate, by an auditor chosen by APRA;
(c) to remove a director or senior manager of the body corporate from office;
(d) to ensure a director or senior manager of the body corporate does not take part in the management or conduct of the business of the body corporate except as permitted by APRA;
(e) to appoint a person or persons as a director or senior manager of the body corporate for such term as APRA directs;
(f) to remove any auditor of the body corporate from office and appoint another auditor to hold office for such term as APRA directs;
(g) not to give any financial accommodation to any person;
(h) not to accept the deposit of any amount;
(i) not to borrow any amount;
(j) not to accept any payment on account of share capital, except payments in respect of calls that fell due before the direction was given;
(k) not to repay any amount paid on shares;
(l) not to pay a dividend on any shares;
(m) not to repay any money on deposit or advance;
(n) not to pay or transfer any amount or asset to any person, or create an obligation (contingent or otherwise) to do so;
(o) not to undertake any financial obligation (contingent or otherwise) on behalf of any other person;
(p) to make changes to the body corporate ' s systems, business practices or operations;
(q) to reconstruct, amalgamate or otherwise alter all or part of any of the following:
(i) the business, structure or organisation of the body corporate;
(ii) the business, structure or organisation of the group constituted by the body corporate and its subsidiaries;
(r) to do, or to refrain from doing, anything else in relation to the affairs of the body corporate.
A direction under paragraph (n) not to pay or transfer any amount or asset does not apply to the payment or transfer of money pursuant to an order of a court or a process of execution.
(2AA)
However, APRA must not direct, or give a direction that would cause or require, a covered bond special purpose vehicle to:
(a) deal, or not deal, with an asset to the extent that the asset secures covered bond liabilities of an ADI; or
(b) make a payment, or not make a payment, in relation to a covered bond liability of an ADI.
Note:
Covered bond special purpose vehicles hold assets that secure liabilities in relation to covered bonds: see Division 3A of Part II .
(2A)
Without limiting the generality of subsection (2), a direction referred to in a paragraph of that subsection may:
(a) deal with some only of the matters referred to in that paragraph; or
(b) deal with a particular class or particular classes of those matters; or
(c) make different provision with respect to different matters or different classes of matters.
(2AAA)
The kinds of direction that may be given as mentioned in subsection (2) are not limited by any other provision in this Part (apart from subsection (2AA)).
(2AAB)
The kinds of direction that may be given as mentioned in a particular paragraph of subsection (2) are not limited by any other paragraph of that subsection.
(2B)
Without limiting the generality of paragraph (2)(r), a direction under that paragraph to a foreign ADI may be any one or more of the following:
(a) a direction that the ADI act in a way so as to ensure that:
(i) a particular asset, or a particular class of assets, of the ADI is returned to the control (however described) of the part of the ADI ' s banking business that is carried on in Australia; or
(ii) a particular liability, or a particular class of liabilities, of the ADI ceases to be the responsibility (however described) of the part of the ADI ' s banking business that is carried on in Australia;
(b) a direction that the ADI not act in a way that has the result that:
(i) a particular asset, or a particular class of assets, of the ADI ceases to be under the control (however described) of the part of the ADI ' s banking business that is carried on in Australia; or
(ii) a particular liability, or a particular class of liabilities, of the ADI becomes the responsibility (however described) of the part of the ADI ' s banking business that is carried on in Australia.
(3)
The direction may deal with the time by which, or period during which, it is to be complied with.
(4)
The body corporate has power to comply with the direction despite anything in its constitution or any contract or arrangement to which it is a party.
(4A)
If the direction requires the body corporate to cause a subsidiary to do, or to refrain from doing, an act or thing:
(a) the body corporate has power to cause the subsidiary to do, or to refrain from doing, the act or thing; and
(b) the subsidiary has power to do, or to refrain from doing, the act or thing;
despite anything in the subsidiary ' s constitution or any contract or arrangement to which the subsidiary is a party.
(4B)
APRA may, by notice in writing to the body corporate, vary the direction if, at the time of the variation, it considers that the variation is necessary and appropriate.
(5)
The direction has effect until APRA revokes it by notice in writing to the body corporate. APRA may revoke the direction if, at the time of revocation, it considers that the direction is no longer necessary or appropriate.
(5A)
Part VI applies to a decision to give a direction:
(a) under subsection (1) as a result of the ground referred to in paragraph (1)(a), (b), (c), (d) or (e); or
(b) under subsection (1AA) as a result of the ground referred to in paragraph (1AA)(a), (b), (c) or (d); or
(c) under subsection (1AC) as a result of the ground referred to in paragraph (1AC)(a) or (b), to the extent that the paragraph relates to a ground referred to in paragraph (1AA)(a), (b), (c) or (d).
(6)
In this section, director has the same meaning as it has in the Corporations Act 2001 , and the affairs of a body corporate include those set out in section 53 of that Act.
Note 1:
Senior manager is defined in section 5 of this Act.
Note 2:
For further information about directions, see Subdivision C .
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.