2004-2005-2006 The Parliament of the Commonwealth of Australia THE SENATE Presented and read a first time Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 (Treasury) A Bill for an Act to amend the law relating to prudential regulation for the purpose of facilitating trans-Tasman cooperation, and for related purposes [Page Break] 1 Short title ........................................................................................... 1 2 Commencement ................................................................................. 1 3 Schedule(s) ........................................................................................ 2 Schedule 1--Trans-Tasman cooperation 3 Australian Prudential Regulation Authority Act 1998 3 Banking Act 1959 4 Financial Sector (Transfers of Business) Act 1999 7 i Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 [Page Break] 1 prudential regulation for the purpose of facilitating 2 trans-Tasman cooperation, and for related 3 purposes 4 The Parliament of Australia enacts: 5 1 Short title 6 This Act may be cited as the Financial Sector Legislation 7 Amendment (Trans-Tasman Banking Supervision) Act 2006. 8 2 Commencement 9 This Act commences on the day on which it receives the Royal 10 Assent. 11 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 1 [Page Break] 1 Each Act that is specified in a Schedule to this Act is amended or 2 repealed as set out in the applicable items in the Schedule 3 concerned, and any other item in a Schedule to this Act has effect 4 according to its terms. 5 2 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 [Page Break] 1 Schedule 1--Trans-Tasman cooperation 2 3 Australian Prudential Regulation Authority Act 1998 4 1 Subsection 3(1) 5 Insert: 6 action that is likely to have a detrimental effect on financial 7 system stability in New Zealand includes an action that prevents or 8 interferes with an outsourcing arrangement. 9 2 Subsection 3(1) 10 Insert: 11 New Zealand financial institution means a financial institution, as 12 defined in section 2 of the Reserve Bank of New Zealand Act 1989 13 of New Zealand, that carries on a business in New Zealand. 14 3 Subsection 3(1) 15 Insert: 16 outsourcing arrangement means an arrangement for the business 17 of a New Zealand financial institution, or functions relating to such 18 business, to be carried on by an entity other than the institution. 19 4 Subsection 3(1) 20 Insert: 21 prescribed New Zealand authority means the following: 22 (a) the Reserve Bank of New Zealand; 23 (b) an authority of the government of New Zealand that: 24 (i) has statutory responsibilities relating to prudential 25 regulation or financial system stability; and 26 (ii) is prescribed by the regulations for the purposes of this 27 definition. 28 5 At the end of subsection 8(2) 29 Add "and, in balancing these objectives, is to promote financial system 30 stability in Australia". 31 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 3 [Page Break] 6 After section 8 1 Insert: 2 8A Trans-Tasman cooperation 3 (1) In performing and exercising its functions and powers, APRA 4 must: 5 (a) support the prescribed New Zealand authorities in meeting 6 their statutory responsibilities relating to prudential 7 regulation and financial system stability in New Zealand; and 8 (b) to the extent reasonably practicable, avoid any action that is 9 likely to have a detrimental effect on financial system 10 stability in New Zealand. 11 (2) APRA must balance the requirements of subsection (1) with the 12 requirements specified in section 8. 13 (3) If: 14 (a) APRA proposes to take an action; and 15 (b) APRA has reasonable cause to believe that the action is 16 likely to have a detrimental effect on financial system 17 stability in New Zealand; 18 APRA must, to the extent that APRA considers reasonably 19 practicable in the circumstances, having regard to urgency or other 20 similar constraint, consult with and consider the advice of each 21 prescribed New Zealand authority APRA considers to be relevant 22 in the circumstances before taking the action. 23 (4) The performance of a function or the exercise of a power by APRA 24 is not invalid merely because of a failure by APRA to comply with 25 this section. 26 7 Section 46 27 After "Commonwealth", insert "or prescribed New Zealand 28 authorities". 29 Banking Act 1959 30 8 Subsection 5(1) 31 Insert: 32 4 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 [Page Break] action that is likely to have a detrimental effect on financial 1 system stability in New Zealand includes an action that prevents or 2 interferes with an outsourcing arrangement. 3 9 Subsection 5(1) 4 Insert: 5 New Zealand registered bank means a registered bank, as defined 6 in section 2 of the Reserve Bank of New Zealand Act 1989 of New 7 Zealand, that carries on a business in New Zealand. 8 10 Subsection 5(1) 9 Insert: 10 outsourcing arrangement means an arrangement for the business 11 of a New Zealand registered bank, or functions relating to such 12 business, to be carried on by an entity other than the bank. 13 11 Subsection 5(1) 14 Insert: 15 prescribed New Zealand authority means the following: 16 (a) the Reserve Bank of New Zealand; 17 (b) an authority of the government of New Zealand that: 18 (i) has statutory responsibilities relating to prudential 19 regulation or financial system stability; and 20 (ii) is prescribed by the regulations for the purposes of this 21 definition. 22 12 Subsection 5(1) (at the end of paragraph (a) of the 23 definition of prudential matters) 24 Add: 25 (iii) not to cause or promote instability in the New Zealand 26 financial system; or 27 13 Subsection 5(1) (definition of prudential regulation) 28 Repeal the definition. 29 14 Subsection 5(1) 30 Insert: 31 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 5 [Page Break] prudential requirement regulation means a regulation under 1 section 11A. 2 15 After paragraph 9A(2)(b) 3 Insert: 4 (ba) it would be contrary to financial system stability in Australia 5 for the authority to remain in force; or 6 16 After paragraph 11AB(2)(c) 7 Insert: 8 (ca) it would be contrary to financial system stability in Australia 9 for the authority to remain in force; or 10 17 Paragraphs 11CA(1)(a) and (aa) 11 Omit "prudential regulation", substitute "prudential requirement 12 regulation". 13 18 After paragraph 11CA(1)(d) 14 Insert: 15 (da) the body corporate is conducting its affairs in a way that may 16 cause or promote instability in the Australian financial 17 system; or 18 19 Paragraph 11CA(2)(a) 19 Omit "prudential regulation", substitute "prudential requirement 20 regulation". 21 20 Section 12 22 Before "It is the duty", insert "(1)". 23 21 Section 12 24 Omit "several ADI's", substitute "several ADIs and for the promotion 25 of financial system stability in Australia". 26 22 At the end of section 12 27 Add: 28 (2) To avoid doubt, section 8A of the Australian Prudential 29 Regulation Authority Act 1998 (which deals with trans-Tasman 30 6 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 [Page Break] cooperation) applies to the performance of functions and the 1 exercise of powers by APRA under this Division. 2 23 After section 14D 3 Insert: 4 14DA Administrator in control--additional duties where action may 5 affect financial system stability in New Zealand 6 (1) If an administrator of an ADI's business has reasonable cause to 7 believe that an action that the administrator proposes to take is an 8 action that is likely to have a detrimental effect on financial system 9 stability in New Zealand, the administrator must: 10 (a) notify APRA as soon as practicable; and 11 (b) obtain APRA's written consent before taking the action. 12 (2) The administrator is not required to comply with subsection (1) if 13 the administrator is satisfied that it is not reasonably practicable to 14 do so, having regard to urgency or other similar constraint. 15 (3) The performance of a function or the exercise of a power by an 16 administrator is not invalid merely because of a failure by the 17 administrator to comply with this section. 18 (4) If APRA receives a notice under paragraph (1)(a), it must provide 19 details of the notice to every prescribed New Zealand authority that 20 APRA considers to be relevant in the circumstances before 21 granting written consent to the administrator. 22 (5) APRA is not required to comply with subsection (4) if APRA is 23 satisfied that it is not reasonably practicable to do so, having regard 24 to urgency or other similar constraint. 25 (6) The performance of a function or the exercise of a power by APRA 26 is not invalid merely because of a failure by APRA to comply with 27 this section. 28 (7) An administrator of an ADI's business may consult a prescribed 29 New Zealand authority about whether an action the administrator 30 proposes to take is likely to have a detrimental effect on financial 31 system stability in New Zealand. 32 Financial Sector (Transfers of Business) Act 1999 33 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006 7 [Page Break] 24 At the end of Part 1 1 Add: 2 7A Application of sections 8 and 8A of the APRA Act 3 To avoid doubt, sections 8 and 8A of the Australian Prudential 4 Regulation Authority Act 1998 (which deal with APRA's 5 objectives and trans-Tasman cooperation respectively) apply to the 6 performance of functions and the exercise of powers by APRA 7 under this Act. 8 8 Financial Sector Legislation Amendment (Trans-Tasman Banking Supervision) Bill 2006 No. , 2006