Explanatory Memorandum
(Circulated by authority of the Minister for Small Business and Assistant Treasurer, the Hon Kelly O'Dwyer MP)General outline and financial impact
The Financial System Legislation Amendment (Resilience and Collateral Protection) Bill 2016 (the Bill) amends the Payment Systems and Netting Act 1998 (PSN Act) and associated provisions in other Acts so that financial institutions in Australia can comply with internationally-agreed margining requirements when dealing in over-the-counter (OTC) derivatives. More specifically, it ensures that they can give, and enforce rights in respect of, margin provided by way of security.
The Bill also provides legal certainty about the operation of Australian law in relation to termination rights (also known as close out rights) under certain financial market transactions; and approved Real Time Gross Settlement (RTGS) systems, approved netting arrangements and netting markets (more specifically, market netting contracts) in all market conditions.
Date of effect: The amendments will commence on the 28th day after the Bill receives Royal Assent.
Proposal announced: The Government announced, in its response to the Financial System Inquiry (the Inquiry), on 20 October 2015 its intention to amend legislation to support globally coordinated policy efforts and facilitate the ongoing participation of Australian entities in international capital markets.
Financial impact: The measures have no financial impact on Commonwealth expenditure or revenue.
Human rights implications: This Bill does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3.
Compliance cost impact: There is no regulatory compliance cost associated with this Bill.
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