Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008 (105 of 2008)

Schedule 2   Other measures: banking

Banking Act 1959

23   After section 70B

Insert:

70C Authorising contracts etc. for protecting depositors’ interests and financial system stability

Authorising the making of contracts and arrangements

(1) With the Finance Minister’s written approval, the Minister may authorise the making of contracts and arrangements by the Commonwealth for the purposes of:

(a) protecting the interests of depositors of ADIs in ways that are consistent with the continued development of a viable, competitive and innovative banking industry; or

(b) protecting financial system stability in Australia.

Specifying amounts to be credited to Special Account

(2) The authorisation must specify the amount (if any) to be credited to the Financial System Stability Special Account, so that the total described in subsection (3) does not exceed by more than $20,000,000,000 the total described in subsection (4).

Note: This ensures that the balance of the Special Account directly attributable to authorisations under this section cannot exceed $20,000,000,000 at any time.

(3) The total described in this subsection is the total of all the amounts specified under subsection (2) in authorisations made under this section (taking account of any amendments of those authorisations).

(4) The total described in this subsection is the total of all the amounts taken under subsection 21(2) of the Financial Management and Accountability Act 1997 to be debited from the Financial System Stability Special Account for expenditure for the purpose described in paragraph 70G(a) of this Act.

Note: That purpose is making a payment under a contract or arrangement whose making was authorised under this section.

Amending specification of amount to be credited

(5) The Minister may amend an authorisation made under this section, but only to change the specification of an amount under subsection (2), within the limit set out in that subsection.

Authorisation cannot be revoked

(6) The Minister cannot revoke an authorisation made under this section.

Authorisation or amendment not disallowable or subject to expiry

(7) An authorisation or amendment made under this section is a legislative instrument, but neither section 42 (disallowance) nor Part 6 (sunsetting) of the Legislative Instruments Act 2003 applies to the authorisation or amendment.

When authorisation or amendment takes effect

(8) The authorisation or amendment takes effect from the time it is made, despite subsections 12(1) and (2) of the Legislative Instruments Act 2003.

70D Borrowing funds for payments under authorised contracts etc.

(1) Subsection (2) applies if the Minister has determined under section 70C an amount to be credited to the Financial System Stability Special Account.

(2) On behalf of the Commonwealth, the Minister may, with the Finance Minister’s written approval, borrow money for not more than 24 months on terms and conditions specified in, or consistent with, the approval, so that the total unrepaid borrowing under this section is not more than $20,000,000,000 at any time.

(3) The Finance Minister may delegate, in writing, to an SES employee or acting SES employee in the Department that is administered by the Finance Minister, the Finance Minister’s power of approval for the purposes of subsection (2).

(4) In this section:

borrow includes raise money or obtain credit, whether by dealing in securities or otherwise, but does not include obtain credit in a transaction forming part of the day-to-day operations of the Commonwealth.

70E Financial System Stability Special Account

(1) The Financial System Stability Special Account is established by this section.

(2) The Account is a Special Account for the purposes of the Financial Management and Accountability Act 1997.

70F Credits to the Account

(1) There must be credited to the Account amounts equal to the following:

(a) the amount specified in an authorisation under any of the following sections as an amount to be credited to the Account:

(i) section 70C;

(ii) section 131A of the Insurance Act 1973;

(iii) section 251A of the Life Insurance Act 1995;

(b) an amount borrowed under any of the following sections:

(i) section 70D;

(ii) section 131B of the Insurance Act 1973;

(iii) section 251B of the Life Insurance Act 1995.

Note: An Appropriation Act may contain a provision to the effect that, if any of the purposes of a Special Account is a purpose that is covered by an item in the Appropriation Act (whether or not the item expressly refers to the Special Account), then amounts may be debited against the appropriation for that item and credited to that Special Account.

(2) To avoid doubt, if:

(a) the amount specified in an authorisation described in paragraph (1)(a) is credited to the Account; and

(b) the authorisation is later amended so as to increase the amount;

only the increase, and not the whole of the increased amount, is to be credited to the Account as a result of the amendment.

Note: Crediting the whole of the increased amount to the Account would lead to double-counting of the amount specified in the authorisation before the amendment.

70G Purposes of the Account

The purposes of the Account are as follows:

(a) making a payment under a contract or arrangement whose making was authorised under section 70C;

(b) making a payment under a contract or arrangement whose making was authorised under section 131A of the Insurance Act 1973;

(c) making a payment under a contract or arrangement whose making was authorised under section 251A of the Life Insurance Act 1995;

(d) repaying a borrowing, and paying interest on a borrowing, made under any of the following sections:

(i) section 70D;

(ii) section 131B of the Insurance Act 1973;

(iii) section 251B of the Life Insurance Act 1995;

(e) meeting the expenses of administering the Account.

Note: See section 21 of the Financial Management and Accountability Act 1997 (debits from Special Accounts).

70H Debits to reflect reduced amounts specified in authorisations

If an authorisation under any of the following sections specifying an amount to be credited to the Account is amended so as to reduce the amount, an amount equal to the reduction must be debited from the Account:

(a) section 70C;

(b) section 131A of the Insurance Act 1973;

(c) section 251A of the Life Insurance Act 1995.