Explanatory Memorandum
(Circulated by authority of the Treasurer, the Honourable Peter Costello MP)1 Outline
1.1 This Bill forms a part of a package of legislation to implement the Government's response to the recommendations of the Financial System Inquiry as announced by the Treasurer, the Hon. Peter Costello, MP, in the House of Representatives on 2September 1997.
1.2 The Bill contains 19 schedules outlining amendments and additions to a diverse range of legislation affected by the Treasurer's financial sector reform package.
1.3 The Bill implements new legislation consistent with the Treasurer's 2 September announcement, provides necessary transitional provisions to smooth the passage to the new regulatory/legislative framework, and seeks to rationalise and modernise provisions that have become dated or obsolete. The Bill also contains various consequential items arising from legislative amendments to various Acts referred to in the schedules and other Bills included in the broader package.
1.4 The details of the Bill (including summaries of each schedule) are provided in Section 5.
Financial Impact Statement
1.5 There will be an annual budgetary cost associated with the removal of the requirement on banks to hold non-callable deposits (NCDs) with the Reserve Bank of Australia (RBA). This cost reflects the fact that banks pay (via revenue foregone) the RBA via NCDs significantly more than it costs the RBA to supervise these institutions.
1.6 The requirement for banks to make non-callable deposits will be removed from a date to be set by proclamation. From that date, the annual cost to the budget is estimated to be around $200 million based on current NCD levels.
1.7 Under the new regulatory regime, banks and other Deposit Taking Institutions (DTI) will only be required to contribute funds sufficient to meeting their share of both APRA's costs of prudential supervision and one-off establishment costs and ASIC's costs of consumer regulation in relation to banks and other DTIs.