WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details
Authorised Deposit-Taking Institutions Supervisory Levy
Imposition Bill 1998
Authorised Non-Operating Holding Companies Supervisory Levy
Imposition Bill 1998
Superannuation Supervisory Levy Imposition Bill 1998
Retirement Savings Account Providers Supervisory Levy Imposition
Bill 1998
Life Insurance Supervisory Levy Imposition Bill 1998
General Insurance Supervisory Levy Imposition Bill 1998
Date Introduced: 26 March 1998
House: House of Representatives
Portfolio: Treasury
Commencement: Each of the Bills with the
exception of the Authorised Deposit-taking Institutions Supervisory
Levy Bill 1998, commence on the day that the Australian Prudential
Regulation Authority Act 1998 commences.
The Authorised Deposit-taking Institutions
Supervisory Levy Bill 1998 commences on the earlier of a date to be
fixed by proclamation and two years after the Act receives the
Royal Assent.
If the day of commencement of any of the Acts is
other than 1 July of any year, the Acts have effect subject to
modification provided in the regulations.
To impose levies
on those industries that will be prudentially regulated by the
Australian Prudential Regulation Authority (APRA).
The Financial System Inquiry Final Report (FSI
Report - sometimes referred to as the 'Wallis Inquiry report')
recommended that a single Commonwealth prudential regulator should
be established for the deposit taking (including banks, building
societies and credit unions), insurance (general and life) and
superannuation industries (including retirement savings
accounts).(1) The Government has resolved to implement that
recommendation by the creation of APRA. The creation of APRA will
result in the abolition of the Insurance and Superannuation
Commission and eventually the state-based structure for regulation
of building societies and credit unions.
At present, the various industries are regulated
by different authorities which have separate funding mechanisms.
This has created significant disparities between the nature and
level of funding of each regulator.
Recommendation 104 of the FSI Report is headed
'Regulatory agencies' charges should reflect their costs' and
states:
The regulatory agencies should
collect from the financial entities which they regulate enough
revenue to fund themselves, but not more. As far as practicable,
the regulatory agencies should charge each financial entity for
direct services provided, and levy sectors of industry to meet the
general costs of their regulation.(2)
The government has stated its aim to be:
To establish an administratively
simple and uniform scheme based on the principle of full cost
recover from the institutional categories that are
regulated.(3)
In broad terms, the proposed charges are similar
to those currently imposed on building societies, credit unions and
insurance and superannuation entities. The regulatory functions of
the Reserve Bank are presently funded by the interest forgone on
non-callable deposits held by the Reserve Bank (a requirement which
will be abolished by the Financial Sector Reform (Amendments
and Transitional Provisions) Act 1998).
The funds received as a result of the imposition
of these six levies are to be applied in two ways:
- The Treasurer must determine, for each financial year, the
amount of levy money received during the financial year that is to
be available to cover the costs to the Commonwealth of providing
market integrity and consumer protection functions for prudentially
regulated institutions. That amount is retained in the Consolidated
Revenue Fund;
- The balance of the levy money (after 'taking out' the amount
referred to above) is to be paid to APRA (clause 50 of the
Australian Prudential Regulation Authority Bill 1998).
It is necessary to understand the meaning of the
following two terms so as to understand the levy regime:
- An 'authorised deposit taking institution' is a body corporate
which is authorised, to carry on banking business in Australia
under the Banking Act 1959. It will cover banks, building
societies, credit unions etc.
- An 'authorised non-operating holding company' is a new type of
financial entity designed to allow the formation of financial
conglomerates which are to be allowed to hold more than one
deposit-taking licence.
Further information about the Financial Sector
Inquiry Final Report can be obtained from Parliamentary Library
Research Paper No. 16 of 1996-97, entitled The Wallis Report on
the Australian Financial System: Summary and Critique, by Phil
Hanratty.
(Clauses and clause numbering in each of the
Bills are consistent unless otherwise stated.)
Each of these Bills sets up the mechanism for
determining the amount of the levy that each type of institution is
liable to pay. Liability for the levy will then be created by the
Financial Institutions Supervisory Levies Collection Bill
1998 (clause 6 of each Bill; clause
7 of the General Insurance Supervisory Levy Imposition
Bill 1998).
Amount of the levy -
deposit-taking institutions, insurance companies, superannuation
entities and retirement savings account providers
The amount of the levy is determined under
clause 7 of each Bill (except the General
Insurance Supervisory Levy Imposition Bill 1998 under which
clause 8 is the relevant provision).
The levy payable by each type of institution,
except authorised non-operating holding companies (see below), is a
percentage (levy percentage) of the particular entity's asset
value. The levy percentage is determined by the Treasurer for each
financial year. If the amount calculated is more than the maximum
levy amount or less than the minimum levy amount, the levy imposed
is limited to the maximum levy amount or increased to the minimum
levy amount, as the case may be. The maximum and minimum levy
amounts are determined by the Treasurer each financial year.
The Bills provide that the Treasurer cannot set
the maximum levy amount at more than $500 000 for superannuation
entities, retirement savings account providers and life and general
insurance companies and $1 000 000 for authorised deposit-taking
institutions. Those amount are indexed in accordance with the
consumer price index.
The Treasurer must also determine how an
entity's asset value is to be calculated.
Amount of the levy -
non-operating holding companies
The levy payable by authorised non-operating
holding companies (authorised NOHCs) is determined each financial
year by the Treasurer. There is no requirement that the levy bear
any relationship to the entity's asset value. However, the levy
cannot exceed $500 000 (clause 7 of the
Authorised Non-operating Holding Companies supervisory Levy
Imposition Bill 1998).
The Explanatory Memorandum to the Bills provides
that the amount levied on authorised NOHCs will be a flat amount
because the entities are not expected to hold significant assets
but may require intensive supervision.
-
- Financial System Inquiry, Financial System Inquiry Final
Report, (Mr Stan Wallis, Inquiry Chairman), Canberra, March
1997.
- Ibid., 532.
- Australia, House of Representatives, Treasurer, Second Reading
speech in respect of the Company Law Review Bill 1997,
Parliamentary Debates, 26 March 1998, 1160.
Lee Jones
14 May 1998
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to
Senators and Members of the Australian Parliament. While great care
is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
should not be attributed to the Information and Research Services
(IRS). Advice on legislation or legal policy issues contained in
this paper is provided for use in parliamentary debate and for
related parliamentary purposes. This paper is not professional
legal opinion. Readers are reminded that the paper is not an
official parliamentary or Australian government document.
IRS staff are available to discuss the paper's contents with
Senators and Members
and their staff but not with members of the public.
ISSN 1328-8091
© Commonwealth of Australia 1998
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
duties.
Published by the Department of the Parliamentary Library,
1998.
Back to top