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BANKING ACT 1959 - SECT 11CA

APRA may give directions in certain circumstances

             (1)  Without limiting subsection (1AA), 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

                     (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 such a contravention is likely to give rise to a prudential risk; 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.

       (1AA)  Without limiting subsection (1), 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:

                     (a)  APRA has reason to believe that:

                              (i)  a subsidiary of the body corporate is, or is about to become, unable to meet the subsidiary's liabilities; or

                             (ii)  there is, or there might be, a material risk to the security of the assets of a subsidiary of the body corporate; or

                            (iii)  there has been, or there might be, a material deterioration in the financial condition of a subsidiary of the body corporate; or

                            (iv)  a subsidiary of the body corporate is conducting the subsidiary's affairs in an improper or financially unsound way; or

                             (v)  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; and

                     (b)  APRA considers that the direction is reasonably necessary for one or more prudential matters relating to the body corporate.

          (1A)  The direction must:

                     (a)  be given by notice in writing to the body corporate; and

                     (b)  specify 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) or (1AA) to an ADI, APRA may disregard any external support for the ADI.

          (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 ;

                   (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)  anything else as to the way in which the affairs of the body corporate are to be conducted or not conducted.

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.

          (2B)  Without limiting the generality of paragraph (2)(p), 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 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:

                              (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 under subsection (1) as a result of the ground referred to in paragraph (1)(a), (b), (c), (d) or (e).

             (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.



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