Bills Digest no. 80, 2017–18
PDF version [352KB]
Paula Pyburne, Law and Bills Digest Section
Phillip Hawkins, Economics Section
14 February 2018
Contents
The Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Background
Policy Commitment
Context—the Global Financial Crisis
Resolution regimes
Attributes of a resolution regime
Bank Capital
TLAC standard
Committee consideration
Senate Standing Committee on
Economics
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Amending the Banking Act
About authorisation
Strengthening the authorisation
process
Revoking an authority
Application by a related body
corporate
Extending authorisation to a NOHC
Conversion and write off provisions
Stakeholder comments
Application to deposits
Risks of hybrid securities
Directions power—early intervention
Expanding the directions power
Recapitalisation directions
Secrecy provisions
Protection from liability
Scrutiny of Bills Committee
Position of stakeholders
Permitted disclosures
Statutory management
Exercise of control by APRA or
statutory manager
Termination of control
Statutory manager’s powers and
functions
Safeguards
APRA-appointed administrator
Recommendations
Immunity
Interaction with the Corporations Act
Termination of appointment
Moratorium
Scrutiny of Bills Committee
Winding up an ADI
Application for winding up an ADI
No denial of obligations
Access to the financial claims scheme
About the FCS
Transferred liabilities determination
Winding up and foreign ADIs
Amending the Insurance Act
Background
Authorisation
Conversion and write‑off
provisions
Judicial management
Moratorium
Appointment of judicial manager
Statutory management of general
insurers
Scrutiny of Bills Committee
Human Rights Committee
Recapitalisation
Administrator in control of an
insurer
Winding up
Financial claims scheme
Recapitalisation directions
Secrecy and disclosure
Protection from liability
Amending the Life Insurance Act
Background
Registration
Judicial management
Statutory management of life
companies
Winding up a life company
Conversion and write off provisions
Other provisions
Schedule 4
Concluding comments
Date introduced: 19
October 2017
House: House of
Representatives
Portfolio: Treasury
Commencement: On
Royal Assent
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the Federal
Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at
February 2018.
The Bills Digest at a glance
The purpose of the Financial Sector
Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017
is to amend a number of statutes and so to provide the Australian Prudential
Regulation Authority with an enhanced suite of crisis resolution powers.
Schedules 1–3 of the Bill amend the Banking Act 1959,
the Insurance
Act 1973 and the Life Insurance Act
1995 respectively to ensure that
each of those statutes contains provisions in equivalent (or near equivalent)
terms in relation to:
- authorisation
to carry on a banking business or general insurance business and registration
of a life company—including by extending the authorisation requirement to a
non-operating holding company (NOHC)
- the
process by which an authority or registration may be revoked
- formal
conversion and write off provisions
- APRA’s
power to make binding directions—including recapitalisation directions
- secrecy
and disclosure provisions relating to APRA’s directions
- judicial
management for an general insurance business or a life company
- statutory
management of an ADI, a general insurance business or a life company—including
the powers and functions of a statutory manager, the reasons for appointment
and the termination of control by a statutory manager
- the
appointment of an external administrator
- moratorium
provisions to temporarily prevent creditors and others from taking litigious
and enforcement actions
- the
winding up of an ADI, general insurance business or a life company—including
access to the financial claims scheme and
- dealing
with Australian branches of foreign entities.
Purpose of
the Bill
The purpose of the Financial Sector Legislation Amendment
(Crisis Resolution Powers and Other Measures) Bill 2017 (the Bill) is to amend
a number of statutes and so to provide the Australian Prudential Regulation
Authority (APRA) with an enhanced suite of crisis resolution powers. Those
powers will apply to prudentially regulated authorised deposit-taking
institutions (ADIs), general insurers and life insurance companies as well as
certain group entities.
Structure
of the Bill
The Bill comprises seven Schedules:
For the purposes of this Bills Digest the Banking Act,
the Insurance Act and the Life Insurance Act are referred to collectively
as the Industry Acts.
Background
Policy
Commitment
The final report of the 2014
Financial System Inquiry (FSI) made a number of recommendations to improve
the resilience of Australia’s financial system and enhance the ability of
regulators to deal with a financial crisis. The FSI final report states
The toolkits available to regulators to prevent distress and
resolve failing financial institutions are critical and should be enhanced.
ADIs should also maintain sufficient loss absorbing and recapitalisation
capacity to allow effective resolution with minimal risk to taxpayer funds, in
line with emerging international practice. As this area is complex and
evolving, Australia should take a cautious approach in developing requirements
for such capacity.[1]
The Government released its response to the FSI in October
2015 and committed to strengthen APRA’s regulatory framework to increase
financial sector resilience.
Australia’s financial sector regulatory framework needs to be
stronger than those of comparable economies. The resilience measures will
ensure the banking system is more stable by holding more capital, and will
address risk weights, leverage, loss absorbency and regulators’ crisis
management powers.[2]
The proposals in this Bill seek to implement aspects of
this commitment, specifically those related to loss-absorbency of regulatory
capital and APRA’s crisis management powers.
Context—the
Global Financial Crisis
The global financial crisis (GFC) demonstrated that
instability in financial markets can have significant flow on effects to
tax-payers and the economy. While it is generally regarded that Australia
weathered the GFC well, Australia was not immune from the effects of financial
market dislocation in international markets.[3]
The GFC exposed weaknesses in prudential regulation and supervision in a number
of financial institutions globally and necessitated Government intervention to
protect economies.
At the G20 Leaders’ Summit in Washington in November 2008
Leaders resolved to strengthen international regulatory cooperation and the
consistency of international standards. The Leaders statement states:
Regulation is first and foremost the responsibility of
national regulators who constitute the first line of defense against market
instability. However, our financial markets are global in scope, therefore,
intensified international cooperation among regulators and strengthening of
international standards, where necessary, and their consistent implementation
is necessary to protect against adverse cross-border, regional and global
developments affecting international financial stability.[4]
One of the actions agreed to by the G20 was the
establishment of the Financial Stability Board by enhancing the existing
Financial Stability Forum.[5]
The Financial Stability Board is an international body made up of policy
agencies from a number of major world economies (including Australia) that
makes recommendations about the global financial system.
Resolution
regimes
| In the context of a banking crisis, the literature refers
at first instance to resolving a financial institution—that is
taking steps to resolve the financial distress of the entity rather than
allowing it to fail in which case it would be wound up. |
Attributes
of a resolution regime
In October 2011, the Financial Stability Board issued its Key
Attributes of Effective Resolution Regimes for Financial Institutions
(Key Attributes). The Key Attributes set out relatively comprehensive
principles on the resolution of financial institutions. According to the Key
Attributes, an effective resolution regime should:
-
ensure continuity of systemically important financial services
and payment, clearing and settlement functions
-
protect, where applicable and in coordination with the relevant
insurance schemes and arrangements such depositors, insurance policyholders and
investors as are covered by such schemes and arrangements, and ensure the rapid
return of segregated client assets
- allocate losses to firm owners (shareholders) and unsecured
and uninsured creditors in a manner that respects the hierarchy of claims
- not rely on public solvency support and not create an
expectation that such support will be available
-
avoid unnecessary destruction of value, and therefore seek to
minimise the overall costs of resolution in home and host jurisdictions and,
where consistent with the other objectives, losses for creditors
-
provide for speed and transparency and as much predictability as
possible through legal and procedural clarity and advanced planning for orderly
resolution
-
provide a mandate in law for cooperation, information exchange
and coordination domestically and with relevant foreign resolution authorities
before and during a resolution
- ensure that non-viable firms can exit the market in an orderly
way and
-
be credible and thereby enhance market discipline and provide
incentives for market-based solutions.[6]
In this context, the types of resolution powers that
should be available for dealing with financial institution distress include
robust statutory powers to:
-
issue binding directions to ADIs, general insurers and life
insurers supervised by APRA (regulated entities), including the removal and
replacement of directors and management
-
appoint an administrator to assume control of a regulated entity
-
implement resolution of distress in respect of financial groups,
including holding companies and subsidiaries
-
implement resolution of distress in a branch of a foreign bank or
insurer
-
transfer some or all of the business of an entity or group to
another entity as part of a resolution process
-
override shareholder rights where required
-
establish a bridge institution
-
suspend or cancel financial obligations and
-
facilitate bail-in.[7]
Bank
Capital
One of the most important prudential regulatory approaches
to avoiding bank failure is requiring prudentially regulated financial
institutions to satisfy minimum capital requirements. Capital essentially
reflects a financial institution’s ability to withstand losses without becoming
insolvent.[8]
Bank capital, in its simplest form, represents a bank's ability to absorb
expected losses on its assets without impacting on its ability to repay debt
holders or depositors.
The Australian Prudential Regulatory Authority (APRA) sets
standards on the amount of capital that Australian banks are required to hold.
These are set in line with international standards established by the Basel
Committee on Banking Supervision (BCBS), which were strengthened following the
global financial crisis, with the BCBS finalising the key aspects of its ‘Basel
III’ capital framework in June 2011.[9]
TLAC
standard
In November 2015, the G20 leaders endorsed a new Financial
Stability Board standard for Total Loss-absorbing Capacity (TLAC).[10]
The finalisation of the TLAC standard was a significant milestone in the
international policy reform agenda to address the problem of ‘too big to fail’
where the threatened failure of a systemically important financial institution
leaves authorities with no alternative but to capitalise it using public funds
(that is to ‘bail out’). TLAC has been developed with a focus on
globally-systemically important Banks (G-SIBs), Australian banks are not
considered G-SIBS, but the TLAC standard has nevertheless informed regulatory
developments in Australia.[11]
The TLAC standard builds on a significant body of
international regulatory reform already undertaken by the Financial Stability
Board to improve resolution frameworks for globally significant financial
institutions. In particular, it builds on the Key Attributes which specifies
that Financial Stability Board jurisdictions should have in place legally
enforceable mechanisms to implement a ‘bail-in’.[12]
The purpose of the TLAC standard is to ensure that, in the
event of a bank crisis, there is a mechanism to stop the contagion to other
banks and cut the possible domino effect by allowing public authorities to
spread unmanageable losses on bank shareholders and creditors.[13]
Importantly, it is designed to ensure that a failing bank will not, and does
not expect to be, bailed-out by the Government and taxpayers.
TLAC requires banks to hold additional capital above their Basel
III capital requirements. Instruments with conversion or write-off features are
anticipated to be a significant component of TLAC requirements.
Committee consideration
Senate Standing Committee on Economics
The Bill was referred to the Senate Standing Committee on
Economics (Economics Committee) for inquiry and report by 9 February 2018.[14]
The Economics Committee stated:
The committee is satisfied that depositors are protected both
by the [Financial Claims Scheme] and under the Banking Act. Under the FCS, the
Australian Government guarantees the prompt repayment of deposits at a failed Australian
ADI of up to $250 000 per depositor. The Banking Act includes
'depositor-preference provisions' which give depositors priority over most
other creditors in the winding up of an ADI or insurer, to the extent that
depositors have not already been paid out by the FCS.[15]
The Economics Committee recommended that the Bill be
passed.[16]
The report does not contain dissenting comments.
Senate Standing Committee for the Scrutiny of Bills
The Senate Standing Committee for the Scrutiny of Bills
(Scrutiny of Bills Committee) considered the Bill and made requests from the
relevant Minister in relation to its concerns.[17]
Those concerns and the Minister’s response are set out below.
Policy position of non-government parties/independents
The Australian Labor Party (ALP) has expressed its support
for the measures in the Bill. Speaking in relation to the Bill, Shadow
Treasurer, Chris Bowen described the Bill as ‘very sensible legislation’.
This Bill strengthens APRA's management powers in both
preventing and responding to a financial crisis. Of course, everybody knows a
financial crisis is unlikely, or is very much the exception. But it is also the
case that we should make sure that our regulatory practices are best practice,
up to date and maximise the chances of avoiding a crisis in the first place and
responding rapidly and appropriately, should such a crisis emerge.[18]
Position of major interest groups
A number of submissions have been made to the Senate
Economics Legislation Committee (the Economics Committee) Inquiry into the
Bill. The majority of submissions from industry groups and the regulators
broadly supported the reforms.
However, a number of submissions raised concerns about specific
elements of the Bill, most notably changes to provisions relating to the
conversion of write-off of certain financial instruments, and on the
compatibility of secrecy provisions with foreign laws. These specific
stakeholder views are discussed in the relevant sections of the Bills Digest.
The submissions made to the Economics Committee primarily
reflected on the proposed changes to the legislation affecting the banking
sector.
Financial
implications
According to the Explanatory Memorandum, the Bill will not
create a financial impact for the Government.[19]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility
with the human rights and freedoms recognised or declared in the international
instruments listed in section 3 of that Act. The Government considers that the
Bill is compatible.[20]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights (the Joint
Committee) reported on the Bill in its Scrutiny Report of 28 November 2017 and sought
further advice from the Treasurer on a number of aspects of the Bill.[21]
The Treasurer responded to the Joint Committee on 14
December 2017.[22]
The issues identified by the Joint Committee and the Treasurer’s responses are
set out below.
Amending
the Banking Act
About authorisation
A key aspect of the prudential regulation framework is the
capacity to control entry into the market to ensure that entities undertaking
regulated activities and the individuals responsible for ensuring the financial
soundness of those entities, meet certain minimum standards. Authorisation
serves to control access to prudentially regulated segments of the financial services
market which would otherwise be open to unrestricted entry.[23]
Currently, the authorisation power is primarily concerned
with the entity that will be undertaking the regulated activity.
Schedule 1 to the Bill:
1.
strengthens the authorisation process for ADIs and
2.
extends the authorisation requirement to a non-operating holding company
(NOHC).
Strengthening the authorisation process
Section 9 of the Banking Act requires a body
corporate to apply in writing to APRA for authority to carry on a banking business.
Where the authority is granted, APRA must ensure that notice of the authority is
published in the Gazette.[24]
The Bill empowers APRA to impose
conditions, or additional conditions, or to vary or revoke existing conditions
on the body corporate’s authority at any time. Those conditions must relate to prudential
matters.[25]
What are prudential matters? The Bill repeals and replaces the definition of the term prudential
matters so that it relates to:
- the
conduct of any part of the affairs of, or the structuring or organising of,
an ADI, an authorised NOHC,[26]
a relevant group of bodies corporate, or a particular member or members of
such a group, in such a way as:
- to keep the
ADI, NOHC, group or member or members of the group in a sound financial
position
- to facilitate
resolution of the ADI, NOHC, group or member or members of the group
- to protect
the interests of depositors of any ADI
- not to cause
or promote instability in the Australian financial system or
- not to cause
or promote instability in the New Zealand financial system
- the
conduct of any part of the affairs of an ADI, an authorised NOHC, a relevant
group of bodies corporate, or a particular member or members of such a group,
with integrity, prudence and professional skill.[27]
|
A person who is affected by a decision to impose
conditions, or additional conditions, or a decision to vary conditions that
have been imposed on an authority to carry on a banking business may ask APRA
to reconsider the decision.[28]
If APRA confirms or varies the decision, the person may make an application for
review to the Administrative Appeals Tribunal.[29]
A body corporate commits an offence of strict liability[30]
if it does an act or fails to do an act and as a result contravenes a condition
of its authority to carry on a banking business.[31]
In that case the maximum penalty is 300 penalty units.[32]
An individual may commit the offence because of the provisions in Part 2.4 of
the Criminal Code
Act 1995, which extend criminal responsibility to a person who attempts
to commit an offence, who aids abets, counsels, procures or incites the
commission of an offence, or conspires with another person to commit an
offence. The maximum penalty for an individual is a fine not exceeding 60
penalty units.[33]
Revoking an authority
Existing subsection 9A(2) of the Banking Act sets
out the matters about which APRA is to be satisfied in making a decision to
revoke an authority to carry on a banking business. Item 16 of the Bill
repeals and replaces subsection 9A(2). Much of the content is unchanged and
merely renumbered. The list of legal requirements with which a body corporate
must comply—or face the prospect that its authority will be revoked—has been
expanded and reworded for clarity.[34]
In addition, the Bill provides that APRA may revoke a body
corporate’s authority to carry on a banking business if it is satisfied:
- the
body corporate is a foreign corporation[35]
within the meaning of paragraph 51(xx) of the Constitution
- it
is unlikely to be able to meet its liabilities in Australia and is unlikely to
be able to do so within a reasonable period of time or
- the
authority to carry on a banking business in a foreign country has been revoked
or otherwise withdrawn in that foreign country.[36]
Application
by a related body corporate
Under existing section 11AA of the Banking Act a
body corporate may apply to APRA for an authority in relation to the
body corporate and any ADIs that are subsidiaries of the body corporate from
time to time. APRA may impose conditions, or additional conditions, on the
authority and vary or revoke conditions that have been imposed. Item 17 of
Schedule 1 to the Bill repeals subsections 11AA(3)–(8) of the Banking Act
which deal with the imposition of conditions on such an authority and the
consequences of not complying with them.
In its place proposed sections 11AAA and 11AAB
of the Banking Act (which are inserted by item 18 of Schedule 1
to the Bill) set out APRA’s power to impose conditions on an authority which is
granted following an application from a body corporate and the applicable
penalties in the event of a breach of a condition respectively. They are in
equivalent terms to those which apply to a body corporate which is authorised
to carry on a banking business under section 9 of the Banking Act.[37]
Item 20 repeals and replaces paragraph 11AB(2)(a) of the Banking Act
so that APRA may revoke an authority granted under section 11AA in certain
circumstances.
Extending authorisation to a NOHC
A holding company is a body corporate that controls the
composition of another body corporate's board of directors, is in a position to
cast, or control the casting of, more than one half of the maximum number of
votes that might be cast at a general meeting of another body corporate, or
holds more than one half of the issued share capital of another body corporate
(excluding any part of that issued share capital that carries no right to
participate beyond a specified amount in a distribution of either profits or
capital).[38]
A non-operating
holding company of a body corporate is a body corporate:
- of
which the first body corporate is a subsidiary
- that
does not carry on a business (other than a business consisting of the ownership
or control of other bodies corporate) and
- that
is incorporated in Australia.[39]
A NOHC may advantage a financial services group by
enhancing operational flexibility and risk management capacity. However the
downside to such an arrangement may be increased prudential risk. According to
Treasury:
If a regulated entity is in financial distress, and is part
of a group, it may be necessary to maintain the continued operation of the NOHC
and/or subsidiaries in order to achieve an orderly resolution of the regulated
entity. The inability to control such entities could jeopardise the capacity to
implement an effective resolution. It may also be necessary to ensure that the
NOHC, in its capacity as the controlling shareholder of the ADI or insurer,
takes the steps required to facilitate the resolution of the ADI or insurer.[40]
Despite this, the Banking Act does not currently
require a NOHC to be authorised.
That being the case, Schedule 1 to the Bill empowers APRA
to give a NOHC a notice in writing requiring it to ensure, by a specified time
or within a specified period, that it either becomes an authorised NOHC of the
ADI or one of its subsidiaries becomes an authorised NOHC of the ADI.[41]
The provisions of Part VI of the Banking Act which deal with the
reconsideration and review of decisions apply to a decision to give such a
notice.[42]
The body corporate is empowered to comply with the notice despite anything in
its constitution or any contract or arrangement to which it is a party.[43]
Items 23–28 of Schedule 1 to the Bill amend section
11AF of the Banking Act so that APRA may also make standards about the
subsidiaries of ADIs or authorised NOHCs; a specified class of subsidiaries of
ADIs or authorised NOHCs or one or more subsidiaries of ADIs or authorised
NOHCs.[44]
The standards may impose different requirements to be complied with in
different situations or in respect of different activities.[45]
Item 29 of Schedule 1 to the Bill inserts proposed section 11AG
into the Banking Act so that an ADI, authorised NOHC or a subsidiary of
an ADI or authorised NOHC to which a prudential standard applies must comply
with the standard.
Conversion
and write off provisions
As part of the Basel III capital reforms, APRA introduced
new loss absorbency criteria for regulatory capital instruments in January 2013.[46]
Subsequently the Government issued a consultation paper setting out various
legislative amendments that were:
... intended to ensure that contractual loss absorption
provisions contained in Additional Tier 1 and Tier 2 capital instruments issued
by authorised deposit-taking institutions (ADIs), general insurers (GIs) and
life insurers (LIs) operate as intended and are not rendered ineffective by
provisions in the Corporations Act 2001 that may restrict the ability of
companies to issue, vary, convert or cancel shares.[47]
Item 31 of Schedule 1 to the Bill inserts proposed
Subdivision B—Conversion and write-off provisions into Division 1A of Part
II of the Banking Act which is to apply to certain financial
instruments.
|
What are financial instruments?
Financial instruments are monetary contracts between
parties. They can be created, traded, modified and settled.
The Australian Accounting Standards Board made Accounting
Standard AASB
132 which defines a financial instrument as ‘any contract
that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity’.
What are hybrid financial instruments?
Certain financial instruments issued by financial
institutions may contain contractual provisions which allow for them to be
converted into ordinary equity or written-off upon certain trigger events
such as where APRA makes a recapitalisation direction.
The types of instruments that include these types of
provisions are typically a type of ‘hybrid security’ because they incorporate
features of both debt and equity instruments, for example, they may pay
interest like a debt instrument, but if converted rank alongside equity in
liquidation.[48]
Hybrid securities can be known by a number of names,
including subordinated notes, capital notes and convertible preference
shares.[49]
Hybrids issued by banks are required to have the loss absorption criteria
necessary to meet the banks’ TLAC requirements.[50]
With increases in banks’ capital requirements in recent years, issuances of
hybrid securities have grown significantly.
According to Australian Securities and Investments Commission
(ASIC), Australia’s hybrid sector was around $43.3 billion as at the end of
June 2017, an expansion of around 44 per cent in two years.[51]
In 2013 it was estimated that self-managed superannuation funds account for
around two-thirds of investment in hybrid securities.[52]
|
Specifically,
proposed section 11CAB applies to an instrument that contains
terms for the purposes of the conversion and write‑off provisions
and that is issued by, or to which any of the following is, a party:
- an
ADI, a holding company of an ADI or a subsidiary or related subsidiary
of an ADI[53]
or
- an
entity of a kind prescribed by the regulations.
|
About Banking (Prudential Standard) Determination No.
3 of 2015
The Prudential
Standard APS 330 Public Disclosure (APS 330) took effect on 1 August
2015. It requires an ADI to make accurate, high quality and timely public
disclosures of information on, amongst other things, its capital instruments.
The relevant clauses are:
- all
ADIs to which APS 330 applies must make the disclosures in Attachments A and
B of the prudential standard and must disclose the full terms and
conditions of instruments included in their Regulatory Capital in accordance
with the provisions of this Prudential Standard: clause 10
- if
APRA is not satisfied with the adequacy or quality of an ADI’s prudential
disclosures it may require the ADI to rectify the disclosures or to disclose further
information: clause 23
- an
ADI that has its own website must include a ‘Regulatory Disclosures’ section on
its website: clause 32
- the
disclosures required in Attachment B of APS 330 and the full terms and
conditions of Regulatory Capital instruments must be published continuously.
The disclosures must be updated within seven calendar days if a new capital
instrument is issued and included in Regulatory Capital or a capital
instrument is redeemed, converted into Common Equity Tier 1 Capital, written
off or otherwise changes in nature: clause 41.
These measures ensure that ADI customers do not
unknowingly purchase a financial instrument to which the conversion and
write-off provisions apply.
|
In support of the new
Subdivision, the Bill inserts a range of definitions. In particular, the term conversion
and write‑off provisions means the provisions of the prudential
standards that relate to the conversion or writing off of Additional Tier 1 and
Tier 2 capital, or to any other instrument.[54]
The Bill provides for instruments to be converted
into one or more ordinary shares or mutual equity interests[55]
of an entity including by redeeming or cancelling the instrument or rights
under the instrument.[56]
The instrument may be converted in accordance with its terms despite:
- any
Australian law or any law of a foreign country or a part of a foreign country
(other than a specified law)
- the
constitution of the relevant entity being the entity issuing the
instrument, any entity that is a party to the instrument and any conversion
entity for the instrument[57]
- any
contract or arrangement to which a relevant entity is a party
- any
listing rules or operating rules of a financial market in whose
official list a relevant entity is included[58]
and
- any
operating rules of a clearing and settlement facility through
which the instrument is traded.[59]
The Bill provides that the instrument may be written off
in accordance with its terms—subject to similar conditions as those which apply
for conversion.[60]
Whether an instrument is being converted, or being written off,
in accordance with its terms, or due to the making of a determination by APRA
the Bill provides that this does not allow the contract, or a party to the
contract (other than the first entity), to do the following:
- deny
any obligation under the contract
- accelerate
any debt under the contract
- close
out any transaction relating to the contract or
- enforce
any security under the contract.[61]
Stakeholder
comments
Some of the submissions to the Senate Economics Inquiry
into the Bill raised specific concerns about the write-off and conversion
provisions in the Bill.[62]
The claims made include:
- the
legislation would allow for the conversion or the writing-off of people’s bank
deposits and
- these
instruments are currently being sold to investors that are insufficiently
informed about the potential risks.
Application
to deposits
The current legal framework for conversion and write-off
does not apply to deposit accounts nor does the Bill allow APRA to write-off
deposits or convert them to equity.
First the conversion and write-off provisions
contained in the Bill clearly only apply ‘in relation to an instrument that
contains terms for the purposes of the conversion and write-off provisions’.[63]
Under APRA’s existing powers to stipulate conversion and write-off which are
set out in Prudential Standard APS 330 Public Disclosure, ADIs are required to
make accurate, high quality and timely public disclosures of information about
their capital instruments.
Second a basic deposit product, as defined
under section 761A of the Corporations Act
2001, must meet certain conditions. These include limitations on the
circumstances under which the balance of a deposit account can be reduced.
These circumstances do not include conversion or write-off.
Third APRA has a statutory obligation to protect
the interests of depositors under Division 2 of Part II of the Banking Act,
which states:
It is the duty of APRA to exercise its powers and functions
under this Division [Division 2 of Part II of the Banking Act] for the
protection of the depositors of the several ADIs and for the promotion of
financial system stability in Australia.[64]
This statutory obligation applies to APRA’s powers to
issue a recapitalisation direction under Subdivision AA of Division 2 of Part
II of the Banking Act.
Australia also has a number of specific protections in
place to protect depositors. This includes the Financial Claims Scheme (FCS)
which operates specifically to protect the interests of depositors. In the
unlikely event that a bank fails the Treasurer may activate the FCS. This would
require APRA to provide depositors with access to their deposits within seven
days up to the $250,000 cap protected by the FCS.[65]
It is estimated that the $250,000 cap covers around 99 per cent of deposit
accounts in full and around 80 per cent of household deposits by value.[66]
Deposits above the cap benefit from Australia’s system of depositor
preference which means that in the event that a bank fails the claims of
depositors rank above all equity holders and creditors (after the Government
has been reimbursed for any amounts paid out under the FCS).[67]
These specific depositor protections would generally only
apply as a last resort, once an ADI cannot be resolved. They exist on top of
the numerous layers of prudential regulation (including capital requirements
and ADI risk management requirements) and the interventions that APRA can make
to resolve financial institutions that are in distress (such as recapitalisation,
statutory management and transfer powers). Further, an ADI commits an offence
under subsection 13A(4) of the Banking Act unless it holds sufficient
assets to cover all of its deposit liabilities.
Risks of hybrid
securities
Hybrid securities often have very complex features and the
risks they can pose are often poorly understood by investors.[68]
In Senate Estimates on 26 October 2017, ASIC Chairman Greg Medcraft warned
about the risks of hybrid securities, stating:
The big issue with these securities is the idiosyncratic
risk. Basically, they can be wiped out—there's no default; just through the
stroke of a pen they can be written off. For retail investors in the tier 1
securities they're principally retail investors, some investing as little as
$50,000. These are very worrying. They are banned in the United Kingdom for
sale to retail. I am very concerned that people don't understand, when you get
paid 400 basis points over the benchmark, that is extremely high risk, and I
think that, because they are issued by banks, people feel that they are as safe
as banks. Well, you are not paid 400 basis points for not taking risks, and I
do think this is, frankly, a ticking time bomb.[69]
According to ASIC’s 2013 review of the hybrid securities
market, the majority of sales in the primary market are to retail investors
including two-thirds to self-managed superannuation funds. ASIC found that
despite their warnings about the risks, hybrids are popular with retail
investors because they offer relatively high returns, they are issued by major
banks and other corporates who are generally seen as trusted brands and they
have been promoted by brokers and financial advisers.[70]
In its latest Corporate Plan, ASIC stated that it will
commence a new project in 2017–18 examining the selling and distribution
practices of market intermediaries in relation to hybrids and to improve
investor understanding of the risks of trading hybrids.[71]
The UK has banned the sale of certain hybrids called
‘contingent convertible notes’ (or ‘CoCos’) to retail investors. In August
2014, the United Kingdom’s Financial Conduct Authority (FCA) issued ‘temporary
product intervention rules’ which imposed restrictions on the distribution of
CoCos to retail customers.[72]
The FCA made these restrictions permanent in June 2015.[73]
In issuing the restriction the FCA stated its concerns that ‘these securities
are hard for investors to value and that their features may not fit naturally
with the needs of ordinary retail investors’.[74]
Directions
power—early intervention
Each of the entities that APRA regulates is subject to
APRA’s power to make binding directions. This power is a fundamental
legislative tool for the enforcement of prudential supervision requirements and
the implementation of financial crisis management. The directions power can be
used in several ways including:
- enforcing
prudential requirements where a regulated entity has failed to comply
- as
an early intervention tool to enable APRA to manage problems affecting ADIs and
insurers before they cause failure or systemic problems and
- as
a means of limiting further deterioration in a period of emerging stress.[75]
Schedule 1 to the Bill:
-
expands the directions power in the Banking Act
-
ensures that a recapitalisation direction applies to a NOHC or NOHC
subsidiary as well as to an ADI and
-
provides that certain directions are subject to secrecy and disclosure
conditions.
The secrecy and strict disclosure conditions reflect the fact
that in certain circumstances it may be appropriate to keep the giving of a
direction confidential for a limited period in order to protect
depositors/policyholders or to promote financial system stability in Australia.[76]
Expanding
the directions power
Existing section 11CA of the Banking Act empowers APRA
to give directions to an ADI or an authorised NOHC where APRA has reason to
believe certain matters—and details the sorts of directions it may give in that
case. Subsection 11CA(1) sets out triggers for APRA to give directions based on
the behaviour of the body corporate itself, while subsection 11CA(1AA) sets out
triggers based on the behaviour of subsidiaries of the body corporate.
Item 34 of Schedule 1 to the Bill repeals
subsection 11CA(1AA) and inserts proposed subsections 11CA(1AA)–(1AE)
into the Banking Act. Proposed subsection 11CA(1AA) significantly
expands the list of matters which might act as a trigger for APRA to issue a
direction to a body corporate based on the behaviour of one of its subsidiaries,
such that the triggers will largely mirror those in subsection 11CA(1).
However, proposed subsection 11CA(1AB) qualifies APRA’s power in that
APRA can only issue a direction to an ADI or authorised NOHC in response to
certain triggers under subsection 11CA(1AA) if it is reasonably necessary for
one or more prudential matters relating to the body corporate. The relevant
triggers are:
- a
subsidiary of the body corporate has contravened—or is likely to contravene—a
provision of the Banking Act, a prudential requirement, regulation or a
prudential standard or the Financial Sector (Collection of Data) Act[77]
- a
subsidiary of the body corporate is, or is about to become, unable to meet the
subsidiary’s liabilities[78]
- there
is, or there might be, a material risk to the security of the assets of a
subsidiary of the body corporate[79]
- there
has been, or there might be, a material deterioration in the financial
condition of a subsidiary of the body corporate[80]
or
- a
subsidiary of the body corporate is conducting the subsidiary’s affairs in an
improper or financially unsound way or in a way that may cause it to be unable
to continue to supply services to an ADI.[81]
Existing subsection 11CA(2) of the Banking Act lists
the types of directions that APRA may give. Item 37 of the Bill repeals
and replaces paragraph 11CA(2)(p) and inserts proposed paragraphs
11CA(2)(p)-(r) so that APRA may give directions to a body corporate to do,
or to cause a body corporate that is its subsidiary to do, the following:
- to
make changes to the body corporate’s systems, business practices or operations[82]
- to
reconstruct, amalgamate or otherwise alter all or part of the business,
structure or organisation of the body corporate or the group constituted by the
body corporate and its subsidiaries[83]
- to
do, or to refrain from doing, anything else in relation to the affairs of the
body corporate.[84]
Recapitalisation directions
Subdivision AA of Division 2 of Part II of the Banking
Act applies to an ADI that is a company, registered under the Corporations
Act that has a share capital but does not have a Banking Act
statutory manager.[85]
The Subdivision applies to the NOHC/NOHC subsidiary in the same way that it
does to an ADI if APRA has given a recapitalisation direction to an ADI (the primary
recapitalisation direction) and the ADI is a subsidiary of a NOHC/NOHC
subsidiary that is registered under the Corporations Act, has a share capital
and is not itself under the control of a Banking Act statutory manager.[86]
Within Subdivision AA, subsection 13E(1) empowers APRA to
give an ADI a direction (called a recapitalisation direction)
that requires the ADI to increase the ADI’s level of capital to the level
specified in the direction in specified circumstances. Item 91 of
Schedule 1 to the Bill inserts proposed subsection 13E(1B) into the Banking
Act so that APRA may also give the NOHC/NOHC subsidiary a direction (also a
recapitalisation direction) that requires the NOHC/NOHC
subsidiary to do anything that is specified in the direction.
The direction has effect until APRA revokes it.[87]
Existing subsection 13F(1) of the Banking Act
provides that a recapitalisation direction may direct the ADI to issue shares,
or rights to acquire shares, in the ADI or to issue other capital instruments
of a kind specified in the direction.
Item 93 of Schedule 1 to the Bill inserts proposed
subsections 13F(1A)–(1C) into the Banking Act. The new subsections
provide that a recapitalisation direction to a NOHC/NOHC subsidiary may direct
the NOHC/NOHC subsidiary to do any of the following:
- issue
shares, or rights to acquire shares, in the NOHC/NOHC subsidiary or other
capital instruments in the NOHC/NOHC subsidiary
- acquire
shares, or rights to acquire shares, in an ADI or other capital instruments in
the ADI
- acquire
shares, or rights to acquire shares, in a specified body corporate or other
capital instruments in a specified body corporate.[88]
Existing
section 13N of the Banking Act provides
that a recapitalisation direction is not grounds for the denial of
obligations to an ADI under a contract. Item 102 of Schedule 1 to
the Bill repeals and replaces section 13N so that the provision applies to a body
corporate that is party to a contract—rather than an ADI. The amended section
13N makes clear that the mere fact of the body corporate being subject to a
recapitalisation direction or of another member of a group of bodies corporate being
subject to a recapitalisation direction does not allow the contract, or a party
to the contract (other than the body corporate), to deny any obligation under the
contract, accelerate any debt under the contract, close out any transaction
relating to the contract or enforce any security under the contract.
Importantly under section 14AA of the Banking Act,
the statutory manager of an ADI also has powers to facilitate recapitalisation.
(See discussion about the powers and functions of a Banking Act statutory
manager below.)
Secrecy provisions
Item 48
of Schedule 1 to the Bill repeals existing section 11CF of the Banking Act
which provides a cross-reference to the secrecy requirements in Part 6
of the APRA Act.[89]
Instead, item 56 of Schedule
1 to the Bill inserts proposed Subdivision D—Secrecy and disclosure
provisions relating to directions into Division 1BA of Part II of the Banking
Act. Essentially the new subdivision applies to an entity to which APRA has
given a direction (known as a directed entity).
First, APRA may determine,
in writing, that the direction is subject to the secrecy provisions if APRA
considers that the determination is necessary to protect the depositors of an
ADI or to promote the stability of the financial system in Australia.[90] In that case, APRA must give a copy of the
determination to the directed entity as soon as practicable after
making it.[91]
Second,
the Bill provides that a person is covered by proposed section
11CI of the Banking Act if the person is:
- the
directed entity
- an
officer, employee or contractor of the directed entity at a time on or after
APRA gave the directed entity the direction or
- any
other person who, because of his or her employment, or in the course of that
employment, has acquired information that reveals the fact that the direction
was made.[92]
A person who is, or has been, covered by section 11CI
commits an offence where a directed entity
has been given a direction that is covered
by a secrecy determination and the person discloses information which reveals
the fact that the direction was made. The maximum penalty is imprisonment for two
years.[93]
However, the offence will not arise if disclosure is authorised under another
section of the Banking Act[94]
or the disclosure is required by an order or direction of a court or tribunal.[95]
The person who is being prosecuted will bear an evidential burden in relation
to these matters, which means that he or she must adduce or point to evidence
that suggests a reasonable possibility that the exception applies.[96]
If the person discharges this evidential burden, the prosecution must then
discharge its legal burden to disprove the relevant matter beyond reasonable
doubt.[97]
Protection from liability
In addition, the Bill provides that a person is not liable
in an action, suit or proceeding (whether criminal or civil) in relation to
anything done, or omitted to be done, in good faith by the person if it is done
for the purposes of complying with a direction given by APRA to a body
corporate or in complying with a direction under proposed section 11CI
(secrecy). This protection extends to an officer or senior manager of the body
corporate, an employee or agent of the body corporate, and to the body
corporate itself or a member of a relevant group of bodies corporate of which
the body corporate is also a member.[98]
Scrutiny of
Bills Committee
The Scrutiny of Bills Committee commented on this provision
and the equivalent provision for both the Insurance Act[99]
and the Life Insurance Act.[100]
Of particular concern to the Scrutiny of Bills Committee was the exception to
the offence provision which, as set out above, imposes an evidential burden on
the defendant. The Committee explained its concerns as follows:
Subsection 13.3(3) of the Criminal Code Act 1995 provides
that a defendant who wishes to rely on any exception, exemption, excuse,
qualification or justification bears an evidential burden in relation to that
matter.
At common law, it is ordinarily the duty of the prosecution
to prove all elements of an offence. This is an important aspect of the right
to be presumed innocent until proven guilty. Provisions that reverse the burden
of proof and require a defendant to disprove, or raise evidence to disprove,
one or more elements of an offence, interferes with this common law right.
While in this instance the defendant bears an evidential
burden (requiring the defendant to raise evidence about the matter), rather
than a legal burden (requiring the defendant to positively prove the matter),
the committee expects any such reversal of the evidential burden of proof to be
justified.
In this instance, the explanatory memorandum states that the
evidentiary burden rests on the person bound by the secrecy provision “because
they are best positioned to provide the evidence as it is within their
knowledge”... The committee notes that the [Guide to Framing Commonwealth
Offences, Infringement Notices and Enforcement Powers[101]]
requires more than just the defendant knowing that a certain fact exists, it
must be a matter that is peculiarly within their knowledge. As such, it
is not clear to the committee that matters such as whether the disclosure has
been permitted by APRA, authorised by relevant legislative provisions or
required by an order or direction of a court or tribunal, would be matters
peculiarly within the defendant's knowledge. These matters appear to be matters
more appropriate to be included as an element of the offence.[102]
The Treasurer responded to the Committee’s request for
further explanation stating:
[the] proposed sections ... set out secrecy provisions which
the Australian Prudential Regulation Authority (APRA) may apply to ensure that
details of a direction given by APRA to an authorised deposit-taking
institution (ADI) or insurer or related entities are not disclosed. While most
directions will properly be publically available, there are limited
circumstances where a period of confidentiality is necessary to ensure panic
does not develop in financial markets as a consequence of precipitously
announced resolution actions.[103]
The Treasurer went on to explain the defences available
and that the defendant bears an evidential burden in relation to the defences
because ‘the matters listed as defences would normally be expected to be peculiarly
within the knowledge of the defendant’.[104]
In response to this explanation, the Scrutiny of Bills
Committee noted the Guide to framing Commonwealth offences provides that
a matter should only be included in an offence-specific defence where:
- it
is peculiarly within the knowledge of the defendant and
- it
would be significantly more difficult and costly for the prosecution to
disprove than for the defendant to establish the matter.[105]
The Scrutiny of Bills Committee was not satisfied that the
defences named in the Bill met the test set out above. The Committee requested
that the key information provided by the Minister be included in the
Explanatory Memorandum to the Bill.[106]
Position of
stakeholders
The Australian Bankers Association (ABA) raised specific
concerns that a direction made by APRA may be inconsistent with disclosure
requirements under foreign laws or listing rules of foreign securities
exchanges.[107]
The ABA requested that the Committee recommend that the APRA be required to
have regard to the obligations imposed on an ADI or NOHC under any applicable
laws, including foreign laws before making a secrecy order.
Further, the ABA has asked that the Committee consider
recommending that an exception to the secrecy obligations be introduced that
allows for disclosure of information by a person subject to a secrecy
determination to other officers in the institution as reasonably necessary.
Permitted disclosures
Schedule 1 to the Bill provides that some disclosures relating
to directions covered by a secrecy determination are permitted.
First, a person may disclose information that
reveals the fact that the direction was made, to the extent that the
information has already been lawfully made available to the public.[108]
Second,
the Bill empowers APRA to make a determination in writing that a specified
person may disclose specified information in
relation a specified direction or a specified class of directions.[109]
In addition, APRA may, by legislative instrument
allow a specified class of persons to disclose specified kinds of information
in relation to the direction or any kind of information in relation to the
direction.[110]
In either of those circumstances, APRA may include
conditions in relation to the kind of entities to which the disclosure may be
made, the manner in which the disclosure is to be made and any other matter
that APRA considers appropriate.[111]
Third,
a person covered by section 11CI
may disclose information that reveals the fact that the direction was made provided
that the disclosure is to the person’s legal representative and the purpose of
the person making the disclosure is for the legal representative to provide
legal advice, or another legal service, in relation to the direction.[112]
Fourth, a person covered by section 11CI in relation to a
direction may disclose information that reveals the fact that the direction was
made if:
- the
person is an APRA member,[113]
an APRA staff member,[114]
a Commonwealth officer who is covered by paragraph 56(1)(c) of the
definition of officer in the APRA Act[115]
- the
information is protected information or is contained in a protected
document[116]
and
- the
disclosure is in accordance with subsection 56(3), (4), (5), (5AA), (6),
(6A), (7), (7A), (7B) or (7C) of the APRA Act.[117]
Additionally a person
covered by section 11CI in relation to a direction may disclose
information that reveals the fact that the direction was made if:
- the
disclosure is made in circumstances (if any) set out in the regulations[118]
or
- another
person covered by section 11CI disclosed that information to the relevant person
for an approved purpose and the disclosure by the relevant person is for the
same purpose.[119]
Statutory
management
It is important that APRA has effective powers to intervene
when regulated financial institutions are at risk of experiencing financial
difficulties that threaten their ongoing viability, and to ensure the effective
resolution of the situation in a manner that maintains the stability of the
financial system and protects depositors. The statutory management regime
provides:
... a flexible mechanism for dealing with a financial
institution in acute distress and where APRA does not have confidence that the
board and management of the ADI or insurer is capable of resolving the distress
satisfactorily or where the board and management are mismanaging the entity.
Statutory and judicial management provides a tool through which a range of
potential resolution actions may be implemented. For example, statutory or
judicial management enables the implementation of a resolution that preserves
the core business and functionality, and the economic value, of a regulated
entity with a view to the entity’s business continuing as a going concern.[120]
Schedule 1 to the Bill:
-
expands the list of circumstances in which APRA may investigate or take
control of an ADI’s business in order to protect depositors
-
substitutes existing references to an ADI statutory manager
with references to a Banking Act statutory manager
-
sets the circumstances in which control will terminate and
-
details the functions and powers of the statutory manager.
Exercise of
control by APRA or statutory manager
Under existing subsection 13A(1) of the Banking Act,
APRA may investigate the affairs of an ADI, appoint a person to investigate the
affairs of an ADI, take control of the ADI’s business or appoint an
administrator to take control of the ADI’s business in specified circumstances
which are listed in paragraphs 13A(1)(a)–(c). Subsection 13A(1) of the Banking
Act provides that an ADI statutory manager—being either APRA
or an administrator of an ADI’s business appointed by APRA—may take control of
a regulated entity’s business. The Bill substitutes existing references to an ADI
statutory manager with references to a Banking Act statutory
manager.[121]
Item 64 inserts proposed paragraphs 13A(1)(d)
and (e) to expand the list of circumstances in which APRA may exercise the
power to investigate or take control of an ADI to include:
- that
an external administrator has been appointed to a holding company of the ADI and
APRA considers that the appointment poses a significant threat to the operation
or soundness of the ADI, the interests of its depositors or the stability
of the financial system in Australia
- if
the ADI is a foreign ADI—that an application for the appointment of an external
administrator of the foreign ADI, or for a similar procedure in respect of the
foreign ADI, has been made in a foreign country or that an external
administrator has been appointed to the foreign ADI (or a similar appointment
has been made) in a foreign country.
The provisions are consistent with APRA’s expanded
authorisation powers as discussed above.
Item 65 of Schedule 1 to the Bill repeals
subsection 13A(2) and inserts proposed subsections 13A(1B)–(1F) and proposed
subsections 13A(2) and (2A). The operation of new provisions is explained
below.
First APRA may take action in relation to a body
corporate (called the target body corporate). Those actions are
either taking control of the business of the target body corporate or appointing
an administrator to take control of the business of the target body corporate.[122]
Second the target body corporate must be:
- an
authorised NOHC of an ADI, a subsidiary of an authorised NOHC of an ADI or a
subsidiary of an ADI
- incorporated
in Australia and
- not
a body corporate of a kind specified in regulations (if any).[123]
Third, the conditions in proposed subsections 13A(1D),
(1E) or (1F), as set out below, must be satisfied.[124]
The condition for proposed subsection 13A(1D) is
satisfied if:
- either
a Banking Act statutory manager has taken control of the relevant ADI—or APRA
intends that a Banking Act statutory manager will take control for any of the
reasons specified in paragraphs 13A(1)(a)–(e) and
- APRA
considers that the target body corporate provides services that are, or
conducts business that is, essential to the capacity of the relevant ADI to
maintain its operations.
The condition for proposed subsection 13A(1E) is
satisfied if:
- either
a Banking Act statutory manager has taken control of the relevant ADI—or APRA
intends that a Banking Act statutory manager will take control for any of the
reasons specified in paragraphs 13A(1)(a)–(e) and
- APRA
considers that it is necessary for a Banking Act statutory manager to take
control of the target body corporate, in order to facilitate the resolution of
the relevant ADI, an authorised NOHC of the relevant ADI, a relevant group of
bodies corporate of which the relevant ADI is a member or a particular member
or particular members of such a group.
The condition for proposed subsection 13A(1F) is
satisfied if:
- there
is an external administrator of the target body corporate, or APRA considers
that, in the absence of external support the target body corporate may become
unable to meet its obligations or may suspend payment and
- APRA
considers that it is necessary to take action under subsection 13A(1C) in order
to enable the relevant ADI to maintain its operations, or to facilitate
the resolution of the relevant ADI, an authorised NOHC of the relevant ADI, a
relevant group of bodies corporate of which the relevant ADI is a member or a
particular member or particular members of such a group.
Proposed subsection 13A(2A) provides that more than
one Banking Act statutory manager may be appointed.
Termination of control
The current formulation of section 13C of the Banking Act
can be read as meaning that, in the absence of insolvency, APRA’s control of an
ADI or statutory management can only be terminated where depositors have been
repaid or will be repaid. The Banking Act does not provide the
flexibility for APRA to terminate its control of an ADI or to terminate
statutory management in a wider range of circumstances—in particular where the
resolution of the ADI’s affairs has been completed and APRA’s control or
statutory management is no longer necessary.[125]
That being the case, item 79 of Schedule 1 to the
Bill repeals and replaces subsection 13C(1) of the Banking Act so
that if APRA assumes control of a body corporate’s business or appoints an
administrator of a body corporate’s business, either APRA or the administrator must
have control of the body corporate’s business until APRA considers that it is
no longer necessary or APRA has applied for the body corporate to be wound up.
This is called an ultimate termination of control.
Statutory manager’s powers and functions
As stated above the Banking Act makes reference to an
ADI statutory manager. Under the Bill, a reference to an ADI
statutory manager becomes a reference to a Banking Act statutory
manager and picks up the functions and powers set out in existing subsection
14A(1) of the Banking Act—being the powers and functions of the members
of the board of directors of the ADI (collectively and individually), including
the board’s powers of delegation. Item 107 of Schedule 1 to the Bill
amends subsection 14A(1) so that a Banking Act statutory manager
of a body corporate has the powers and functions of the members of the board of
directors of the body corporate.[126]
Safeguards
Item 131 of Schedule 1 to the Bill inserts proposed
section 14AAA into
the Banking Act to prevent a Banking Act statutory manager of a body
corporate (the body corporate under management) from performing a
function or exercising a power under section 14A where the performance or
exercise is not for the purposes of subsection 14AA(1) of the Banking
Act[127]
or Part 3 or 4 of the FSTR Act[128]
and either or both of the following apply:
- first:
the body corporate under management is not an ADI and the performance or the
exercise would result in the provision of services by the body corporate under
management to a related body corporate (or vice versa) or the transfer of
assets between the body corporate under management and another body
corporate (otherwise than in the ordinary course of business) for other than
fair value, where the performance or the exercise is not required or permitted
by a binding arrangement that was in existence immediately before the Banking
Act statutory manager started to be in control of the business,[129]
- second:
where the body corporate under management is an authorised NOHC of an ADI, the
performance or the exercise requires using funds of the body corporate or a
subsidiary of the body corporate to increase the level of capital of the ADI to
a specified level and the shareholders of the body corporate have not agreed,
by ordinary resolution, to that use of the funds.[130]
APRA-appointed
administrator
As stated above the Banking Act statutory manager
may be APRA itself or an administrator appointed by APRA.
Schedule 1 to the Bill:
-
updates the nature of the recommendations that the administrator of an
ADI may give APRA
-
includes immunities for a Banking Act statutory manager
from civil or criminal liability and
-
allows APRA to terminate the appointment of an administrator and, if
necessary, appoint another.
Recommendations
Existing subsection 14B(1) of the Banking Act empowers
an administrator to may make certain recommendations to APRA, by instrument in
writing given to APRA. Item 146 repeals and replaces subsection 14B(1)
to expand the list of recommendations to include circumstances where the body
corporate is an authorised NOHC. In that case a recommendation may be made that
APRA revoke the authorised NOHC’s authority to carry on a banking business under
subsection 11AA(2).
Immunity
Statutory managers and judicial managers are charged with
the responsibility to protect depositor and policyholder interests and to
promote financial system stability and, in accordance with this twin purpose,
may be required to take actions that have the potential to adversely affect
directors, shareholders and certain classes of creditors. It is therefore
conceivable that adversely affected stakeholders may subsequently seek to
recover any loss suffered by a legal action against the statutory manager or
judicial manager personally.
Section 14C of the Banking Act provides that a
statutory manager will only be liable for loss that is incurred because of any
fraud, dishonesty, negligence or wilful failure to comply with the provisions
of the Banking Act. In comparison, section 62ZM of the Insurance Act
and section 179 of the Life Insurance Act provide greater protection
than is provided by the Banking Act in the following respects:
- under
the insurance legislation, immunity is not available where the judicial manager
fails to act ‘in good faith’. By contrast, immunity is not available under the Banking
Act where the statutory manager acts in a ‘negligent’ fashion. In most
situations, it will be easier for a claimant to establish negligence than a
lack of good faith and
- the
insurance legislation is expressed to apply generally to ‘any liability’. By
contrast, the Banking Act refers to ‘a loss’.
In order to impose an equivalent standard in the Banking
Act, item 149 of Schedule 1 to the Bill repeals existing subsections
14C(1)-(4) of the Banking Act. Proposed subsections 14C(1)-(3) operate
so that a Banking Act statutory manager, or a person acting on
behalf of a Banking Act statutory manager, is not subject to any liability
(whether civil or criminal) in respect of anything done, or omitted to be done,
in the exercise or performance, or the purported exercise or performance, of
powers, functions or duties conferred or imposed on the Banking Act
statutory manager by or under the Banking Act. There is an
exception to this general rule—that is, the immunity will not apply to an act
or omission in bad faith.[131]
Interaction
with the Corporations Act
Within Chapter 5 (which deals with external administration),
section 588G of the Corporations Act provides that a director has a duty
to prevent insolvent trading by a company. The Bill provides that a Banking
Act statutory manager is not liable under that section for anything
done, or omitted to be done, in the exercise or performance, or the purported
exercise or performance, of powers, functions or duties conferred or imposed on
the Banking Act statutory manager by or under the Banking Act.[132]
Chapter 5 of the Corporations Act provides for the
recovery of property or compensation for the benefit of creditors of an insolvent
company. Section 588FE of the Corporations Act
sets out various circumstances in which a transaction that has been entered
into by an insolvent company is voidable. These are known as ‘clawback’
provisions.
The Bill provides that transactions entered into by a Banking
Act statutory manager are not voidable under section 588FE of the Corporations
Act merely because the transaction is:
- an
uncommercial transaction (as defined in section 588FB of the Corporations
Act) of the body corporate
- an
unfair preference (as defined in section 588FA of the Corporations Act)
given by the body corporate to a creditor of the company or
- an
insolvent transaction (as defined by section 588FC of the Corporations Act)
of the body corporate.[133]
Termination
of appointment
Currently section 14E of the Banking Act authorises
APRA to terminate the appointment of an administrator. Item 162 repeals
and replaces subsections 14E(1) and (2) so that APRA may terminate the
appointment of an administrator of a body corporate’s business and either appoint
another person as administrator of the body corporate’s business or take control
of the body corporate’s business in the following circumstances:
- the
administrator contravenes a requirement of Division 2 of Part II of the Banking
Act or
- APRA
considers such action necessary to facilitate the resolution of the body
corporate, a relevant group of bodies corporate of which the body corporate is
a member, or another member of such a group, to protect the interests of
depositors of the ADI or to promote financial system stability in Australia.[134]
The terms and conditions of an administrator’s appointment
may provide for termination in circumstances in addition to those set out above.[135]
Moratorium
When a statutory manager is appointed to an ADI he, or
she, needs time to assess the nature of the financial damage affecting the
institution and will, along with APRA and the Government, be required to
determine an appropriate resolution. The statutory manager also needs to have
access to the institution’s resources for the purposes of the administration.
The moratorium provisions temporarily prevent creditors
and others from taking litigious and enforcement actions that have the
potential to distract from or hamper the diagnosis and resolution of financial
distress.
Currently section 15B of the Banking Act provides
that a person cannot begin or continue a proceeding in a court against an ADI
while an ADI statutory manager is in control of the ADI’s business unless the
court grants leave on the ground that the person would be caused hardship if
leave were not granted or APRA consents to the proceedings beginning or
continuing. This is known as a moratorium provision. Item 190 repeals section 15B
and inserts proposed sections 15B–15BE into the Banking Act which
detail six separate circumstances in which a moratorium applies.
First, where a Banking Act statutory manager
is in control of a body corporate’s business, a person cannot begin or continue
any of the following proceedings against the body corporate in a court or
tribunal:[136]
- a
proceeding against the body corporate, including a cross‑claim or third
party claim
- a
proceeding in relation to property of the body corporate
- a
proceeding to enforce any security (including a mortgage or charge) granted by
the body corporate, or by a related body corporate of the body corporate, over
any property that the body corporate owns, uses, possesses, occupies or in
which the body corporate otherwise has an interest.[137]
This general rule does not apply if the court or tribunal
grants leave for the proceedings to be begun or continued (subject to any
relevant terms) on the ground that the person would be caused hardship if leave
were not granted or if APRA or the Banking Act statutory manager consents to
the proceedings. [138].
Second,
no enforcement process in relation to
property of a body corporate can be begun or proceeded with if a Banking Act
statutory manager is in control of the body corporate’s business—unless the
Federal Court of Australia grants leave or if APRA or the Banking Act statutory
manager consents to the proceedings.[139]
Third, a person must not dispose of property if the
property is owned by another person, being a body corporate over whose business
a Banking Act statutory manager has control.[140]
The exception to this general rule is where either APRA or the Banking Act
statutory manager consents to the disposal.[141]
Fourth,
section 440B of the Corporations
Act, which restricts the exercise of third party property rights
(including, for example, taking possession of the property or otherwise seeking
to recover it) applies during a period in which a Banking Act statutory manager
is in control of a body corporate’s business in the same way it applies during
the administration of a company.[142]
Fifth, if a Banking Act statutory manager who is in
control of a body corporate’s business requests a person or authority (the supplier)
to supply an essential service to the body corporate in Australia and the body
corporate owes an amount to the supplier in respect of the supply of the
essential service[143]
before the day on which the Banking Act statutory manager took control of the
body corporate’s business the supplier must not refuse to comply with the
request for the reason only that the amount is owing or make it a condition of
the supply of the essential service pursuant to the request that the amount is
to be paid.[144]
Sixth,
a body corporate need not hold its
annual general meeting within the time frames specified in sections 250N and
601BR of the Corporations Act if a Banking Act statutory manager is in
control of the body corporate’s business at the end of that period.[145]
Scrutiny of
Bills Committee
The Scrutiny of Bills Committee commented in relation to
the first of these measures.[146]
Whilst the Committee noted the rationale for the measure as set out in the
Explanatory Memorandum it questioned ‘whether the rights of creditors and third
parties would be adversely affected by these provisions even once a statutory
manager is no longer in control of the body corporate’.[147]
In particular, the Committee was uncertain whether a person
could lose their right to bring an action against a body corporate because of
statutory time limits having passed while the body corporate's business was
under the control of a statutory manager. That being the case, the Minister was
requested to provide further information.
In response the Treasurer advised that the relevant
provisions ‘are moratorium provisions only and temporarily suspend or stay the
right to bring or continue proceedings rather than remove the cause of action’
and that ‘there are checks and balances that mitigate against the risk of these
provisions applying in a harsh or unjust way’.[148]
Winding up
an ADI
Schedule 1 to the Bill:
-
allows APRA to apply to the Federal Court for an order that an ADI be
wound up if APRA considers that the ADI is insolvent and could not be restored
to solvency
-
sets out the circumstances in which protected account holders may access
the financial claims scheme
-
provides that an ADI is to be wound up in accordance with the Corporations
Act and
-
provides for the making of a transferred liabilities determination
by APRA.
Application
for winding up an ADI
Currently, section 14F of the Banking Act empowers
APRA to apply to the Federal Court of Australia for an order that an ADI be
wound up if an ADI statutory manager is in control of the ADI’s business and
APRA considers that the ADI is insolvent and could not be restored to solvency
within a reasonable period. Item 163 of Schedule 1 to the Bill repeals
this section. In its place item 212 inserts proposed section 16AAA
into Division 2 of Part II of the Banking Act. The new section removes
the requirement that an ADI statutory manager is in control of the ADI’s
business before the winding up application is made. APRA must inform the
Minister of the application as soon as possible.[149]
No denial
of obligations
Existing section 15C of the Banking Act sets limits
on the actions third parties can take in the event that a statutory manager is
appointed to an ADI. Item 191 of Schedule 1 to the Bill repeals and
replaces section 15C to expand the operation of the section to a party to a
contract with a body corporate. Upon the appointment of a Banking Act
statutory manager, the contract or another party to the contract (other
than the body corporate) cannot:
- deny
any obligations under that contract
- accelerate
any debt under that contract
- close
out any transaction relating to that contract or
- enforce
any security under that contract.
These provisions are important because the appointment of
a statutory manager to an ADI is likely to be an ‘event of default’ under many
commercial contracts. This may have a number of consequences that are
detrimental to the continuing operations of the ADI. That being the case, the
provisions protect the financial position of the ADI and the interests of
depositors until the statutory manager has had time to make an assessment as to
an appropriate course of action.[150]
Access to
the financial claims scheme
About the FCS
The Financial Claims Scheme (FCS) was established by the
Government in 2008.[151]
Section 16AD of the Banking Act:
- allows
the Minister to make a declaration about an ADI that entitles account-holders to
have access to the FCS, if APRA has applied to the Federal Court to have the
ADI wound up and
- substitutes
APRA for those account-holders as a creditor of the declared ADI to the extent
of the entitlements.[152]
Item 213 of Schedule 1 to the Bill amends section
16AB of the Banking Act so that the Minister may make a declaration
about an ADI if either APRA has applied for the ADI to be wound up or a Banking
Act statutory manager is in control of the ADI’s business. The declaration
entitles account-holders who have certain protected accounts to
access the financial claims scheme.[153]
An account-holder who has a protected account
with a net credit balance with a declared ADI at the declaration time is
entitled to be paid by APRA an amount equal to the sum of that balance and the
interest (if any) accrued by, but not credited to, the account-holder before the
declaration time—increased or decreased in accordance with the regulations to
take account of clearance of transactions connected with the protected account.[154]
Section 7 of the Banking Regulation
2016 provides that the following are protected accounts:
| call accounts |
cash management accounts |
| cheque accounts |
current accounts |
| debit card accounts |
farm management deposit accounts |
| pensioner deeming accounts |
personal basic accounts |
| retirement savings accounts |
savings accounts |
| term deposit accounts |
transactions accounts |
| trustee accounts |
mortgage offset accounts (whether a full or partial
offset) that are separate deposit accounts |
The amount payable is capped at
$250,000.[155]
Transferred
liabilities determination
Section 25 of FSTR Act empowers APRA to make a
written determination that there is to be a compulsory total transfer or compulsory
partial transfer of business from one ADI to another ADI in specified circumstances.
In making the determination, APRA must consider the interests of depositors of
the transferring body and determine that it is appropriate for the transfer to
be made.
Item 215 of Schedule 1 to the Bill amends section
16AD of the Banking Act so that the Minister may declare that
Subdivision C of Division 2AA of Part II of the Banking Act applies to
an ADI if either APRA has applied for the ADI to be wound up or a Banking
Act statutory manager is in control of the ADI’s business. Having done
so, it is open to APRA to make a transferred liabilities determination
provided that the following conditions are satisfied:
- APRA
has made, or proposes to make a determination under section 25 of the FSTR
Act
- the
transfer of business will transfer the liabilities of the declared ADI in respect
of every protected account kept by an account‑holder with the ADI
- APRA
is satisfied that it will be able to identify those protected accounts
- APRA
made reasonable estimates of the total amount to which relevant account‑holders
will be entitled under the FCS (called the FCS amount), the total
amount of the costs that would be incurred by APRA in relation to the exercise
of its powers and the performance of its functions under Division 2AA (called the
administration amount) and
- APRA
considers that it is reasonable in the circumstances to make the determination.[156]
Under the
Bill, APRA must make a transferred liabilities determination
and issue a certificate of transfer under section 33 of the FSTR Act
before the receiving body is entitled to be paid the amount specified in the
determination.[157]
Once that occurs:
- an
account‑holder’s entitlement to be paid an amount in respect of a
protected account kept with the declared ADI is reduced to nil[158]
and
- the
declared ADI is liable to pay to APRA an amount equal to the sum of the total
payment amount specified in the determination as soon as the certificate of
transfer comes into force.[159]
Winding up and foreign ADIs
Currently subsection 11E(1)
provides that Division 2 of Part II of the Banking Act (about protections for depositors) does not apply to foreign
ADIs. Further, under existing subsection 11E(2), a foreign ADI commits
an offence if it accepts a deposit from a person in Australia and, before doing
so, does not inform the person in the approved manner and form that the deposit
is not protected under Australian law.
Item 58 of Schedule 1 to the Bill repeals subsection 11E(1)
and inserts proposed subsections 11E(1), 11E(1A) and 11E(1B) into the Banking
Act to clarify that certain provisions do not apply in relation to the business
of a foreign ADI (other than Australian business assets and liabilities) or to the
management of a foreign ADI, to the extent that the management relates to such
business of the foreign ADI.[160]
In support of this amendment item 59 of Schedule 1 to the Bill
inserts the definition of Australian business assets and liabilities
of a foreign ADI, being:
- the
assets and liabilities of the foreign ADI in Australia
- any
other assets and liabilities of the foreign ADI that are related to its
operations in Australia and which are of a kind specified in regulations (if
any).[161]
Item 60 of Schedule 1 to the Bill provides that APRA
may apply to the Federal Court of Australia for an order that a foreign ADI be
wound up if APRA considers that any of the following are satisfied:
- the
foreign ADI is unable to meet its liabilities in Australia, or in one or more
foreign countries, as and when they become due and payable
- an
application for the appointment of an external administrator of the foreign
ADI, or for a similar procedure in respect of the foreign ADI, has been made in
a foreign country
- an
external administrator has been appointed to the foreign ADI, or a similar
appointment has been made in respect of the foreign ADI, in a foreign country.[162]
APRA must inform the Minister of the application as soon
as possible.[163]
If the order is granted, the winding up of the foreign ADI is to be conducted
in accordance with Part 5.7 of the Corporations Act.[164]
Amending
the Insurance Act
The purpose of the Bill is to amend the Industry Acts in
order that they operate in an equivalent manner. That being the case, many of
the amendments to the Insurance Act in Schedule 2 to the Bill are in the
same form as those to the Banking Act.
For this reason, the amendments to the Insurance Act
are not discussed in the same level of detail as for the Banking Act
above.
Background
Liability insurance protects the insured against the
consequences of being legally liable for injury or damage to third parties.
Such policies usually provide that the insured must take ‘all reasonable
precautions’ to prevent the liability from arising. There are a number of types
of liability insurance, including personal liability, public liability,
professional indemnity, and product liability.[165]
One of the features of liability insurance is its 'long tail’. This means that
there can be many years between an injury occurring and the time an insurer
receives the notice of a claim.
The activities of general insurance companies can be divided
into operating activities (that is, selling insurance) and investing
activities. Revenues from operating activities include insurance premiums and
reinsurance recoveries (that is, claims made by the insurance company on
reinsurance contracts).[166]
Throughout most of the 1990s, the Australian general
insurance industry made underwriting losses which were offset with investment
income.[167]
The collapse of HIH Insurance Limited and associated companies in approximately
March 2001 was significant because HIH was Australia's second largest insurance
company and held a large share of the market for certain classes of liability
insurance. That market share was won through aggressively offering lower
premiums. In effect, HIH’s premiums were not sufficient to either cover claims
made in the event of a catastrophic event or to generate sufficient investment
income to cover the deficit. The collapse of HIH led to premium increases
brought about by more disciplined underwriting.[168]
According to the HIH Royal Commission:
... the deficiency of the group was estimated to be between
$3.6 billion and $5.3 billion. If the ultimate shortfall is anywhere
near the upper end of that range, the collapse of HIH will be the largest
corporate failure Australia has endured to date.[169]
Authorisation
Section 12 of the Insurance Act requires a body
corporate to apply in writing to APRA for authority to carry on an insurance
business in Australia. Where the authority is granted, APRA must ensure that
notice of the authority is published in the Gazette.[170]
APRA may impose conditions, or additional
conditions, or vary or revoke existing conditions on the body corporate’s
authority at any time. Those conditions must relate to prudential matters.[171]
The Bill repeals and replaces the definition of prudential matters
in subsection 3(1) of the Insurance Act.[172]
The updated definition is in equivalent terms to the definition that is
inserted into the Banking Act by Schedule 1 to the Bill.[173]
Consistent with the amendments to the Banking Act,
Schedule 2 to the Bill amends the Insurance Act to strengthen the
authorisation process for insurers in the following ways:
- amending
existing section 15 of the Insurance Act so that the list of legal
requirements with which an insurer must comply—or face the prospect that its
authority will be revoked—is in equivalent terms to those in the Banking Act[174]
- amending
the Insurance Act to extend APRA’s power to revoke an authority to a foreign
corporation[175]
- empowering
APRA to give a notice to a body corporate that is a holding company of a
general insurer where the general insurer is not a subsidiary of an authorised
NOHC, requiring either:
- the
body corporate to become an authorised NOHC of the general insurer or
- that
one of its subsidiaries becomes an authorised NOHC of the general insurer[176]
- expanding
APRA’s power to require each subsidiary of a general insurer or of an
authorised NOHC and each subsidiary of a general insurer or of an authorised
NOHC included in a specified class of subsidiaries to satisfy particular
requirements in relation to prudential matters.[177]
Conversion and write‑off
provisions
Item 17 of Schedule 2 to the Bill inserts proposed
Division 2—Conversion and write-off provisions into Part IIIA of the
Insurance Act.[178]
These provisions are in similar, but not equivalent terms, to those in the Banking
Act with the differences relating to matters that are specific to the Insurance
Act. Importantly, the conversion and write-off provisions apply to a general
insurer, the holding company of a general insurer, a subsidiary or related
subsidiary of a general insurer and any other entity which may be prescribed by
the regulations.[179]
Judicial management
Part VB of the Insurance Act
currently refers to judicial management, external administration and winding up. In particular Part VB empowers APRA to apply to the
Federal Court for an order that a general insurer be placed under judicial
management.[180]
Similarly, a general insurer may, of its own volition, apply to the Federal
Court for an order that it be placed under judicial management—provided that it
has given APRA one month’s notice of that intention.[181]
In response to such an application, the Federal Court may
order that a general insurer be placed under judicial management if it is
satisfied of a number of matters that are listed in the Insurance Act.[182]
The Bill expands the matters about which the Court must be satisfied to
include:
- an
external administrator has been appointed to a holding company of the general
insurer and the appointment poses a significant threat to the operation or
soundness of the general insurer, the interests of policyholders of the general
insurer or the stability of the financial system in Australia[183]
- if
the general insurer is a foreign general insurer—an application for the
appointment of an external administrator of the foreign general insurer, or for
a similar procedure in respect of the foreign general insurer, has been made in
a foreign country or
- if
the general insurer is a foreign general insurer—an external administrator has
been appointed to the foreign general insurer, or a similar appointment has
been made in respect of the foreign general insurer, in a foreign country.
Moratorium
Currently section 62P of the Insurance Act provides
that a proceeding in a court against the general insurer or in relation to any
of its property cannot be commenced or proceeded with except with the judicial
manager’s written consent or with the leave of the Federal Court on any terms
that the Court imposes. Item 33 of Schedule 2 to the Bill repeals
section 62P and inserts proposed sections 62P–62PE into the Insurance
Act to detail the circumstances in which a moratorium applies. These are in
equivalent terms to those which are inserted into the Banking Act by item
190 of Schedule 1 and discussed at pages 24 to 25 of this Digest.
Appointment
of judicial manager
Currently, subsection 62R(1) of the Insurance Act provides
that where the Federal Court orders the judicial management of a general
insurer, it is the Court which must appoint the judicial manager. The Bill
provides for the appointment of a substitute judicial manager or additional
judicial managers should the need arise.[184]
In addition, the Bill repeals and replaces section 62T of
the Insurance Act to make clear that a person with the powers and
functions of an officer of the general insurer immediately before the
appointment of the judicial manager ceases to have those powers and functions.
Similarly a person with the powers and functions of an agent of a foreign
general insurer ceases to have those powers and functions.[185]
The Bill also imbues the judicial manager with immunity
from civil or criminal liability in equivalent terms to those in the Banking
Act—that is, it extends to an act done or not done, provided that the act
or omission was not in bad faith.[186]
Statutory management of general
insurers
Currently the Insurance Act does not provide for the
statutory management of a general insurer. Item 58 of Schedule 2 to the
Bill inserts proposed Division 1A—Statutory Management of General Insurers
into Part VB of the Insurance Act.
The new Division:
-
empowers APRA to take control of a general insurer’s business or appoint
an administrator to take control of the business in order to protect policy
holders—provided that certain conditions are met[187]
-
in relation to a business that is incorporated in Australia and is an
authorised NOHC of a general insurer, a subsidiary of an authorised NOHC of a
general insurer or a subsidiary of a general insurer (called a target
body corporate)—to take control of the business of the target body
corporate or appoint an administrator to take control of the business of the
target body corporate provided that certain conditions are met[188]
-
provides that the statutory manager is an Insurance Act statutory
manager[189]
-
sets the circumstances in which control will commence[190]
and terminate[191]
and
-
details the functions and powers of the statutory manager and[192]
-
provides safeguards on the exercise of the Insurance statutory manager’s
powers.[193]
These provisions are in equivalent terms to those which
are inserted into the Banking Act by items 65, 79 and 131 of
Schedule 1 to the Bill.
Scrutiny of
Bills Committee
Amongst the functions and powers of the Insurance Act
statutory manager is the power to require a person who has, at any time,
been an officer of the body corporate, to provide information including to
produce books, accounts and documents.[194]
A person commits an offence if the person fails to provide the information or
to produce the books, accounts and documents as requested. The maximum penalty
for the offence is imprisonment for 12 months. A person is not excused from
complying with such a requirement on the ground that doing so would tend to
incriminate the person or make him, or her, liable to a penalty.
The Scrutiny of Bills Committee was concerned that this
provision (and its equivalents in the other Industry Acts) overrides the common
law privilege against self-incrimination. As the Explanatory Memorandum to the
Bill does not provide an explanation for the provision, the Committee asked the
Minister for further information.
In response the Treasurer stated:
Overriding the privilege against self-incrimination is
justified in this context because only the key personnel of a relevant entity
will have access to information and documents relating to that entity's
financial condition. It is essential for a statutory manager to be able to
obtain this information quickly to assist with the management and crisis
resolution of a relevant entity that is financially distressed. By compelling
relevant officers or ex-officers to provide the required information and
documents, statutory managers will be able to maximise their ability to
rehabilitate a distressed entity. This will benefit the entity's customers,
creditors and other suppliers. In the event of a significant crisis, APRA would
also be able to use the information gathered to support decision making and
prevent contagion in the system.[195]
In addition to its concerns about the privilege against
self-incrimination, the Scrutiny of Bills Committee noted that proposed
subsection 62ZOD(5)[196]
provides that information given in compliance with the requirement is not
admissible in evidence against the individual in a criminal proceeding or a
proceeding for the imposition of a penalty, other than a proceeding in respect
of the falsity of the information if, prior to giving the information the
individual claims that the information might tend to incriminate him or her or
expose them to a penalty. This is called a use immunity.
However, the Bill does not contain a derivative use
immunity. This means that any information obtained as an indirect consequence
of the production of the information or documents may be admissible in evidence
against the person. The Scrutiny of Bills Committee questioned the absence of
such an immunity.[197]
In response to the Committee’s inquiry the Treasurer
stated:
... if derivative use immunity applied, it would often be very
difficult for the prosecution to show that the evidence they rely on to prove a
criminal case against an officer relating to the failure of the financial
institution was uncovered through an absolutely independent and separate
investigation process. This may in turn lead to hesitation on the part of a
statutory manager to exercise the information-obtaining power, undermining the
purpose for which the power was conferred. [198]
The Treasurer also pointed out that the provisions are
consistent with the majority of existing self-incrimination provisions in other
APRA-administered legislation, including provisions in the Superannuation
Industry (Supervision) Act 1993 and Private Health
Insurance (Prudential Supervision) Act 2015.[199]
Human
Rights Committee
The Human Rights Committee also expressed concern about this
provision from the perspective of the International Covenant on Civil and
Political Rights (ICCPR).[200]
Article 14 of the ICCPR guarantees the right to a fair trial. Article 14(3)(g)
includes the right not to incriminate oneself.
According to the Human Rights Committee:
... the availability of 'use' and 'derivative use' immunities
can be one important factor in determining whether the limit on the right not
to incriminate oneself is proportionate. That is, they may act as a relevant
safeguard ... However, no 'derivative use' immunity is provided for proposed
sections 62ZOD and 179AD, which would prevent information or evidence
indirectly obtained from being used in criminal proceedings against the person.[201]
The Treasurer responded to the concern expressed by the
Human Rights Committee in similar terms to those contained in his response to
the Scrutiny of Bills Committee.[202]
Recapitalisation
The existing recapitalisation provisions in the Banking
Act are subject to minor amendments by Schedule 1 to the Bill. Schedule 2
to the Bill inserts recapitalisation provisions into the Insurance Act.
Under the
Bill, an Insurance Act statutory
manager of a body corporate that is a company that has a share capital
and is registered under the Corporations Act may do one or more of the
following acts:
- issue
shares, or rights to acquire shares, in the company
- cancel
shares, or rights to acquire shares, in the company
- reduce
the company’s share capital by cancelling any paid‑up share capital that
is not represented by available assets
- sell
shares, or rights to acquire shares, in the company or
- vary
or cancel rights or restrictions attached to shares in a class of shares in the
company.[203]
The Insurance Act statutory manager must
give written notice to the persons who were members of the company just before he
or she took the relevant action, identifying the action and explaining its
effect on their interests as members.[204]
Importantly before undertaking any of the above actions
the Insurance Act statutory manager must obtain and consider a
report about the fair value of the shares or rights concerned from an expert
who is not an associate of the statutory manager or of the company.[205]
The method for determining the fair value for each share
is a three step process. The first step is for the expert to assess the
value of the company as a whole, in accordance with any assumptions which the Minister
has provided.[206]
The second step is for the expert to allocate that value among the
classes of shares in the company that either have been issued or that the Insurance
Act statutory manager proposes to issue. The third step is for
the expert to allocate the value of each class pro rata among the shares in
that class that either have been issued or that are proposed to be issued.[207]
However, there is an exception to the general rule that an
expert report must first be obtained. That occurs where APRA is satisfied that
delaying the relevant action to enable the report to be obtained would
detrimentally affect policyholders with the insurer and financial system
stability in Australia.[208]
Where APRA makes a determination to that effect it must be published in the Gazette
and a copy given to the Insurance Act statutory manager
concerned.[209]
The Bill
inserts provisions which provide the Insurance Act statutory
manager immunity from civil or criminal
liability in equivalent terms to those that are inserted into the Banking
Act by item 149 of Schedule 1 to the Bill.[210]
Administrator in control of an
insurer
In some circumstances an external
administrator may be appointed to an entity in a group. The financial distress
of that entity may cause or exacerbate distress in an insurer—for example
through interruption to essential services provided to the insurer by the
entity.
Schedule 2 to the Bill inserts the
following requirements for external administrators:
-
an administrator of a body corporate’s business must give APRA, upon
request, a written report showing how the control of the body corporate’s
business is being carried out[211]
-
on termination of his, or her, appointment an administrator of a body
corporate’s business must give to APRA a written report showing how the control
of the body corporate’s business was carried out over the period of the
administrator’s appointment[212]
-
an external administrator must follow directions given to it by APRA[213]
and
-
where an administrator of a body corporate’s business has reasonable
cause to believe that an action that he, or she, proposes to take is likely to
have a detrimental effect on financial system stability in Australia, the
administrator must notify APRA as soon as practicable and obtain APRA’s written
consent before taking the action.[214]
APRA may terminate the appointment of an administrator of
a body corporate’s business if the administrator contravenes any of the
requirements set out above or if APRA considers it is necessary to do so to facilitate
the resolution of the body corporate, to protect the interests of policyholders
of a general insurer or to promote financial system stability in Australia.[215]
In that case, APRA may either appoint another person as the administrator of
the body corporate’s business or take control of the body corporate’s business
itself.
The appointment of an external administrator of a body
corporate is terminated when an Insurance Act statutory manager
takes control of the body corporate’s business.[216]
The Bill inserts moratorium provisions in equivalent terms to those inserted by
item 33 of Schedule 2 to the Bill.[217]
Winding up
The Bill extends APRA’s existing
powers in the winding up of an insurer to also cover an authorised NOHC, a
subsidiary of a general insurer or authorised NOHC[218]
and to a foreign general insurer.[219]
Financial
claims scheme
Part VC of the Insurance Act relates to the operation
of the financial claims scheme. Item 68 of Schedule 2 to the Bill
broadens the purpose of Part VC so that it includes allowing APRA to facilitate
a transfer of business from the declared general insurer to a receiving body
under the Financial Sector (Transfer and Restructure) Act 1999 by
entitling the receiving body to amounts in respect of the protected policies.[220]
The Bill provides that the financial claims scheme may be
activated by the Minister if a general insurer is under either judicial
management or statutory management, or where an external administrator for the
general insurer has been appointed under the Corporations Act.[221]
Schedule 2 to the Bill:
-
provides for interim claims and payments to be made under the scheme to
holders of protected policies[222]
-
provides for interim claims and payments to be made under the scheme to
third parties holders of protected policies[223]
-
empowers APRA to make a transferred liabilities determination[224]
and to issue a certificate of transfer under the FSTR Act[225]
and
-
creates a liability on the part of a declared general insurer to pay to
APRA an amount equal to the total payment amount specified in the transferred
liabilities determination.[226]
Recapitalisation
directions
Existing Part IX of the Insurance Act sets out the
circumstances in which APRA may make a recapitalisation direction.
Schedule 2 to the Bill:
-
broadens APRA’s power to make a recapitalisation direction to include
the power to give such a direction to a NOHC/NOHC subsidiary of which a general
insurer is a subsidiary[227]
-
provides that the recapitalisation direction may set out the time by
which it must be complied with[228]
-
sets out the types of recapitalisation direction that may be given to a
NOHC/NOHC subsidiary[229]
-
clarifies the other types of direction that APRA may give under the Insurance
Act so that they are in equivalent terms to those in the Banking Act.[230]
Secrecy and
disclosure
Item 135 inserts proposed Division 3—Secrecy and
disclosure provisions relating to all directions into Part IX of the Insurance
Act. Within the new Division are proposed sections 109–109H which
are in equivalent terms to proposed sections 11CH–11CP of the Banking
Act which are inserted by item 56 of Schedule 1 to the Bill.
Protection
from liability
Item 137 of Schedule 2 to the Bill inserts proposed
sections 127B–127E into the Insurance Act. In
particular, proposed section 127B of the Insurance
Act contains general protections from liability so that a person is not
subject to any liability to any other person in respect of anything done, or
omitted to be done, in good faith and without negligence in the exercise or
performance, or the purported exercise or performance, of powers, functions or
duties under the Insurance Act.
The protection
from liability arising from an action to comply with a direction by APRA in proposed
section 127C is in equivalent terms to the protection in proposed
section 70AA of the Banking Act which is inserted by item 252
of Schedule 1 to the Bill.
Amending
the Life Insurance Act
Background
As at 8 February 2018, there were 29 registered life
insurers operating in Australia.[231]
Life insurance generally covers a range of insurance products including:
- life
cover—also known as term life insurance or death cover, pays a set amount of
money when the insured person dies
- total
and permanent disability (TPD) cover—covers the costs of rehabilitation, debt
repayments and the future cost of living if the insured person is totally and
permanently disabled
- trauma
cover—provides cover in the event of a diagnosis of a specified illness or
injury and
-
income protection—replaces the income lost through an inability
to work due to injury or sickness.[232]
The most common policy type across the industry is a stepped
premium policy. The premium on a stepped premium policy increases each year
according to risk factors such as the client’s age.[233]
According to a review of retail life insurance advice conducted by ASIC in
2014:
... life insurance policies are lapsing at high rates. For
example, for stepped premium policies, we found that, in 2013, policy lapses
doubled from approximately 7% in the first year to 14% in the second year.
After the initial spike, lapse rates remain high (above 14%) for the next three
years before tapering. [234]
High lapse rates are problematic in the face of rising
claims costs.[235]
It has been reported that:
Greater product commoditisation is driving greater price competitiveness
in an environment where many traditional life insurers are losing money due to
inadequate risk pricing, while battling with huge regulatory and structural
changes.[236]
In the face of potential life insurance losses, it is timely
that Schedule 3 to the Bill amends the Life Insurance Act to ensure that
its provisions are consistent with those in the Banking Act and the Insurance
Act.
Registration
Rather than authorising
a body corporate to undertake a banking or general insurance business (as in the
Banking Act and the Insurance Act) the Life Insurance Act
refers to registering life companies.[237] However, consistent with the amendments in Schedules 1 and 2
to the Bill, Schedule 3 empowers APRA to impose conditions, or
additional conditions, or to vary or revoke existing conditions on the body
corporate’s authority at any time.[238]
A life company commits an offence of strict liability[239]
if it does an act or fails to do an act and as a result contravenes a condition
of its registration.[240]
In that case the maximum penalty is 300 penalty units.[241]
An individual may commit the offence because of the provisions in Part 2.4 of
the Criminal
Code Act 1995, which extend criminal responsibility to a person who
attempts to commit an offence, who aids abets, counsels, procures or incites
the commission of an offence, or conspires with another person to commit an
offence. The maximum penalty for an individual is a fine not exceeding 60 penalty
units.[242]
Item 8 of Schedule 3 to the Bill repeals and
replaces section 26 of the Life Insurance Act to list the legal
requirements with which a life company must comply—or face the prospect that
its registration will be revoked.[243]
In the event that APRA considers revocation of registration is appropriate, it
may direct the life company to arrange to assign its liabilities to one or more
other companies that are registered under the Life Insurance Act.[244]
APRA may only approve a proposed assignment of a company’s
liabilities if it is satisfied that the assignment is appropriate, having
regard to:
- the
interests of the company’s policy owners
- the
interests of the policy owners of the company or companies to which the
liabilities are to be assigned
- the
public interest and
- any
other matter APRA considers relevant.[245]
The approval must be in writing and may be made subject to
specified conditions.[246]
If a company (called the first company) accepts
an assignment of liabilities from another company that has been approved by
APRA, a policy owner of a transferring policy is taken to have the same rights
against the first company as they would otherwise have had.[247]
The Life Insurance Act already contains provisions
for the registration of a NOHC.[248]
Item 14 of Schedule 3 to the Bill inserts proposed section 28BA
into the Life Insurance Act to create an offence with a maximum penalty
of 300 penalty units where a body corporate does or fails to do an act which
results in a contravention of a condition of the body corporate’s NOHC
registration. In addition, item 17 of Schedule 3 to the Bill inserts proposed
section 28AA into the Life Insurance Act empowering APRA to give a
notice to a body corporate that is a holding company of a life company (where
the life company is not a subsidiary of a registered NOHC) requiring the body
corporate to either become a registered NOHC of the life company or that one of
its subsidiaries becomes a registered NOHC of the life company.
Judicial
management
Similar to the Insurance Act, the Life Insurance
Act provides for judicial management, other external administration and
winding up of a life company.[249]
Schedule 3 to the Bill:
-
expands the list of the circumstances in which APRA may make an
application to the Court to place a life company under judicial management[250]
-
inserts moratorium provisions in respect of a life company that is under
judicial management.[251]
These moratorium provisions are in equivalent terms to those that are inserted
into the Insurance Act by item 33 of Schedule 2 to the Bill
-
empowers a Court to appoint a substitute judicial manager or an
additional judicial manager in certain circumstances[252]
-
clarifies the effect of judicial management on the powers of officers—so
that the judicial manager has the powers and functions of an officer of the
company[253]
and
-
provides immunity from liability for a judicial manager in respect of
anything done, or omitted to be done in the exercise or performance of his, or
her, duties under the Life Insurance Act.[254]
Statutory management of life companies
Currently the Life Insurance Act does not provide
for the statutory management of a life company. Item 52 of Schedule 3 to
the Bill inserts proposed Division 1AA—Statutory Management of Life Company
into Part 8 of the Life Insurance Act. Essentially,
the provisions of new Division 1AA of the Life Insurance Act
will ensure that a Life Insurance Act statutory manager will have
the same functions and duties as a statutory manager under the Banking Act
and the Insurance Act.
Amongst other things the new Division:
-
empowers APRA to take control of a life company’s business or appoint an
administrator to take control of the business in order to protect the soundness
of the life company or the interest of policy holders—provided that certain
conditions are met[255]
-
in relation to a business that is incorporated in Australia and is a
registered NOHC of a life company, a subsidiary of a registered NOHC of a life
company or a subsidiary of a life company (called a target body corporate)—to
take control of the business of the target body corporate or appoint an
administrator to take control of the business of the target body corporate
provided that certain conditions are met[256]
-
provides that the statutory manager is an Life Insurance Act
statutory manager[257]
- sets the circumstances in which control will commence[258]
and terminate[259]
-
details the functions and powers of the Life Insurance Act statutory
manager[260]
and
-
provides safeguards on the exercise of the Life Insurance Act statutory
manager’s powers.[261]
These provisions are in equivalent terms to those which
are inserted into the Banking Act by items 65, 79 and 131 of
Schedule 1 to the Bill.
In addition, Schedule 3 to the Bill
empowers the Life Insurance Act statutory manager to do specified acts, including but not limited to issuing shares,
cancelling shares and reducing the company’s share capital by cancelling any
paid-up share capital that is not represented by available assets.[262] In that case, the Life Insurance Act statutory manager must
take equivalent steps to those taken under the Banking Act and the Insurance
Act to determine the fair value of each share.[263]
Winding up
a life company
Existing section 181 of the Life
Insurance Act provides that APRA may apply for an order that a life
company be wound up.
Schedule 3 to the Bill:
-
amends section 181 so that APRA may apply for such an order only if
certain conditions are met[264]
and
-
authorises APRA to ask a liquidator for specified information in writing
about the winding‑up of a life company, a registered NOHC and a
subsidiary of a life company or a registered NOHC.[265]
Conversion
and write off provisions
Existing Part 10A of the Life Insurance Act is about
prudential standards and directions. Item 63 of Schedule 3 to the Bill
inserts proposed section 230AAA into the Act to require a life company,
registered NOHC or a subsidiary of a life company or registered NOHC to which a
prudential standard applies to comply with the standard. For example Life Insurance (prudential
standard) determination No. 2 of 2012 (Prudential standard LPS 110: capital
adequacy) requires a life company to maintain adequate capital against the
risks associated with its activities.
Item 64 of Schedule 3 to the Bill inserts proposed
Division 1A—Conversion and write-off provisions into Part 10A of the Life
Insurance Act. The provisions are in equivalent terms to those which are
inserted into the Banking Act and the Insurance Act by this Bill.
Currently, APRA may give a life company a direction (a recapitalisation
direction) that requires the company to increase its level of capital
to the level specified in the direction in certain circumstances.[266]
This is called a primary recapitalisation direction. Item 68 of Schedule
3 to the Bill operates to permit APRA to also give a recapitalisation direction
to the relevant NOHC/NOHC subsidiary in order to facilitate compliance with a
primary recapitalisation direction.[267]
A recapitalisation direction may set out the time during which
the direction must be complied with.[268]
Consistent with the above, a recapitalisation direction to
a NOCH/NOHC subsidiary may direct that body corporate to do any of the
following:
- issue
shares, or rights to acquire shares or other capital instruments in the
NOHC/NOHC subsidiary
- acquire
shares, or rights to acquire shares or other capital instruments in the life
company
- acquire
shares, or rights to acquire shares, or other capital instruments in a
specified body corporate.[269]
APRA already has the power to give a body corporate that
is a life company or a registered NOHC a direction.[270]
Subsection 230B(1) sets out triggers for APRA to give directions based on the
behaviour of the body corporate itself, while subsection 230B(1AA) sets out
triggers based on the behaviour of subsidiaries of the body corporate.
Item 84 of Schedule 3 to the Bill repeals existing
subsection 230B(1AA) and inserts proposed subsections 230B(1AA)–(1AE) into
the Life Insurance Act. to expand the list of matters that might give
rise to the giving of a direction by APRA to include certain conduct by the
subsidiary of the body corporate. Proposed subsection 230B(1AA)
significantly expands the list of matters which might act as a trigger for APRA
to issue a direction to a body corporate based on the behaviour of one of its
subsidiaries, such that the triggers will largely mirror those in subsection 230B(1).
However, proposed subsection 230B(1AB) qualifies APRA’s power in that
APRA can only issue a direction to an ADI or authorised NOHC in response to
certain triggers under subsection 230B(1AA) if it is reasonably necessary
for one or more prudential matters relating to the body corporate. In addition,
Schedule 3 to the Bill adds the following to the list of directions that APRA
may give a body corporate:
- to
make changes to the body corporate’s systems, business practices or operations
- to
reconstruct, amalgamate or otherwise alter all or part of the business,
structure or organisation of the body corporate itself or of the group
constituted by the body corporate and its subsidiaries
- to
do, or to refrain from doing, anything else in relation to the affairs of the
body corporate.[271]
The latter of these directions is further expanded upon by
the Bill so that a direction under that paragraph to an eligible foreign life
insurance company may be:
- a
direction that the company act in a way so as to ensure that
- a
particular asset, or a particular class of assets, of the company is returned
to the control of the part of the company’s life insurance business that is
carried on in Australia or
- a
particular liability, or a particular class of liabilities, of the company
ceases to be the responsibility of the part of the company’s life insurance
business that is carried on in Australia
- a
direction that the company not act in a way that has the result that:
- a
particular asset, or a particular class of assets, of the company ceases to be
under the control of the part of the company’s life insurance business that is
carried on in Australia or
- a
particular liability, or a particular class of liabilities, of the company
becomes the responsibility of the part of the company’s life insurance business
that is carried on in Australia.[272]
Consistent with the amendments in Schedules 1 and 2 to the
Bill, item 102 inserts proposed Subdivision C—Secrecy and disclosure
provisions relating to all directions into Division 2 of Part 10A of the Life
Insurance Act. These provisions are in equivalent terms to those inserted
into the Banking Act by item 56 of Schedule 1 to the Bill and
those inserted into the Insurance Act by item 135 of Schedule 2
to the Bill.
Other provisions
Schedule 4
Schedule 4 to the Bill amends the Financial Sector (Business
Transfer and Group Restructure) Act. The amendments, including the change
of name to the Financial Sector (Transfer and Restructure) Act are
intended to complement the provisions which have been inserted into the
Industry Acts as above. Prior to the enactment of the FSTR Act the
Government and the Reserve Bank used mergers as a prudential tool to deal with
banks in financial distress. However there was no formal power in the hands of
regulators to order a merger or transfer of business between banks or insurance
companies. The FSTR Act (when enacted) provided APRA
with ‘an efficient and effective tool for protecting depositors or policy owner
monies where their institution is in severe financial hardship’.[273]
The amendments in Schedule 4 insert new definitions in
equivalent terms to those that are inserted by Schedules 1–3 of the Bill, for
instance Australian business assets and liabilities[274]
or formalise the meaning of terms which are used in the Industry Acts such as certificate
of transfer.
The key features of the amendments in Schedule 4 to the
Bill are:
- in
certain circumstances APRA may transfer the shares in a failing regulated
entity from the existing shareholders to a body corporate[275]
- APRA
may determine that there is to be a total or partial transfer of business from
a body corporate that is related to a general or life insurer (but is not itself
an ADI, general insurer or life insurer) to another body corporate under
certain circumstances[276]
and
- APRA
may give effect to transfers of business even in the absence of state or territory
legislation being in place to facilitate transfers of business.[277]
Concluding comments
The most controversial aspect of this Bill is that it
formalises the ability of ADIs, general insurers and life companies to convert
or write off certain of their financial instruments if a trigger event occurs.
Whilst convertible instruments have been in the market for
some time, it is only with this Bill that the law puts beyond doubt that
conversion may occur.
Whilst this does not impact ordinary deposits, it is
important for investors to understand the possible consequences of purchasing a
convertible financial product.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Financial
System Inquiry (FSI), Financial
systems inquiry: final report, The Treasury, November 2014, p. 36.
[2]. Australian
Government, Improving
Australia’s financial system: Government response to the financial system inquiry,
p. 4.
[3]. FSI,
Financial
systems inquiry: final report, op. cit., p. 8.
[4]. G20 Leaders, Declaration:
summit on financial markets and the world economy, 15 November 2008, p. 2.
[5]. G20 Leaders, Declaration
on strengthening the financial system – London, 2 April 2009, p. 1.
[6]. The
Treasury, Strengthening
APRA’s crisis management powers, The Treasury website,
consultation paper, September 2012, pp. 4–5.
[7]. Ibid.,
p. 5.
[8]. A
Gorajek and G Turner, ‘Australian
bank capital and the regulatory framework’, Reserve Bank of Australia Bulletin,
September Quarter, 2010.
[9]. Reserve
Bank of Australia (RBA), The Basel
III capital reforms in Australia, RBA website.
[10]. Financial
Stability Board, FSB
issues final Total Loss-Absorbing Capacity standard for global systemically
important banks, media release, 9 November 2015.
[11]. W
Byres (Chairman APRA), ‘From
strength to resilience’, Address to AFR Banking & Wealth Summit, Sydney,
speech, 5 April 2016.
[12]. P
Smith and N Tan, ‘Total
loss-absorbing capacity’, Reserve Bank of Australia Bulletin,
December Quarter, 2015, pp. 59–66.
[13]. DG
Internal Market, Discussion
paper on the debt write-down tool—bail-in, European Commission website.
[14]. The
terms of reference for the inquiry, submissions to the Economics Committee and
the Committee’s final report are available on the inquiry
homepage.
[15]. Senate
Standing Committee on Economics, Financial
Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill
2017 [Provisions], Senate, Canberra, February 2018, p. 22.
[16]. Ibid.
[17]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 13, 2017, The Senate, Canberra, November 2017, p. 28.
[18]. C
Bowen, ‘Second
reading speech: Financial Sector Legislation Amendment (Crisis Resolution
Powers and Other Measures) Bill 2017’, House of Representatives, Debates,
12 February 2018, p. 74.
[19]. Explanatory
Memorandum, Financial Sector Legislation Amendment (Crisis Resolution
Powers and Other Measures) Bill 2017, p. 5.
[20]. The
Statement of Compatibility with Human Rights can be found at pages 217–28 of
the Explanatory
Memorandum to the Bill.
[21]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 12, 28 November 2017, pp. 25–30.
[22]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 1, 6 February 2018, pp. 96–107.
[23]. The
Treasury, Strengthening
APRA’s crisis management powers, op. cit., p. 103.
[24]. Banking
Act, subsection 9(7) and proposed subsection 9(4).
[25]. Banking
Act, proposed subsection 9AA(1) inserted by item 14 of
Schedule 1 to the Bill.
[26]. Section
5 of the Banking Act provides that NOHC is short for
non-operating holding company (see discussion below). An authorised NOHC
means a body corporate which is currently authorised under subsection 11AA(2)
of the Banking Act and is a NOHC of an ADI or ADIs.
[27]. Banking
Act, subsection 5(1), inserted by item 8 of Schedule 1 to the Bill.
[28]. Banking
Act, proposed subsection 9AA(6). Part VI of the Banking Act
provides for the reconsideration and review of decisions.
[29]. Banking
Act, sections 51B and 51C.
[30]. In
a criminal law offence, the proof of fault is usually a basic requirement.
However, offences of strict liability remove the fault (mental) element that
would otherwise apply, but the offence will not criminalise honest errors and a
person cannot be held liable if he, or she, had an honest and reasonable belief
that they were complying with relevant obligations.
[31]. Banking
Act, proposed subsection 9AB(1).
[32]. Under
section 4AA of the Crimes
Act 1914 a penalty unit is equivalent to $210. This means that the
maximum penalty for the offence is $63,000.
[33]. This
means that the maximum penalty is $12,600.
[34]. Banking
Act, proposed paragraph 9A(2)(b).
[35]. A
foreign corporation is a corporation incorporated outside
Australia which carries on business within Australia. See: New South Wales v
Commonwealth (1990) 169 CLR 482, [1990]
HCA 2; Re Dingjan; Ex parte Wagner (1995) 183 CLR 323, [1995]
HCA 16.
[36]. Banking
Act, proposed paragraph 9A(2)(j).
[37]. That
is, proposed sections 9AA and 9AB of the Banking Act which
are inserted by item 14 of Schedule 1 to the Bill.
[38]. Butterworth's
Concise Australian Legal Dictionary, one 3rd edition, LexisNexis
Butterworths, Australia, 2004, p. 202.
[39]. Defined
in subsection 5(1) of the Banking Act.
[40]. The
Treasury, Strengthening
APRA’s crisis management powers, op. cit., p. 10.
[41]. Banking
Act, proposed subsections 11AE(2) and (3) inserted by item 21
of Schedule 1 to the Bill.
[42]. Banking
Act, proposed subsection 11AE(7).
[43]. Banking
Act, proposed subsection 11AE(4).
[44]. Banking
Act, proposed paragraphs 11AF(1)(c)–(e).
[45]. Banking
Act, proposed subsection 11AF(1A).
[46]. M
Cormann (Minister for Finance), Providing
certainty for contractual loss absorption provisions in regulatory capital,
media release, 2 June 2014.
[47]. The
Treasury, Providing
certainty for contractual loss absorption provisions in regulatory capital,
consultation paper, June 2014, p. iii.
[48]. ASIC,
Hybrid
securities, Report 365, August 2013, p. 6.
[49]. Ibid.
[50]. Ibid.,
p. 8.
[51]. Senate
Economics Legislation Committee, Official
committee Hansard, 26 October 2017, p. 30; ASIC, ASIC’s
Corporate Plan 2017–18 to 2020–21, ASIC website, August 2017, p.10.
[52]. ASIC,
Hybrid
securities, op. cit., p. 4.
[53]. Banking
Act, proposed section 11CAA, provides that a related
subsidiary of an ADI means a subsidiary of a holding company of the ADI.
[54]. Banking
Act, proposed section 11CAA, inserted by item 31 of Schedule
1 to the Bill.
[55]. Banking
Act, proposed section 11CAA, provides that mutual equity
interests has the same meaning as in the prudential standards.
[56]. Banking
Act, proposed section 11CAA.
[57]. Banking
Act, proposed section 11CAA provides that an entity (the first
entity) is a conversion entity for an instrument if
(a) the instrument is issued by another entity, or another entity is a party to
the instrument and (b) the instrument converts, in accordance with the terms of
the instrument, into one or more ordinary shares or mutual equity interests of
the first entity.
[58]. Banking
Act, proposed section 11CAA, provides that the term operating
rules has the meaning given by section 761A of the Corporations Act
2001.
[59]. Banking
Act, proposed subsection 11CAB(2). Proposed section 11CAA, provides
that the term clearing and settlement facility has the meaning
given by Division 6 of Part 7.1 of the Corporations Act.
[60]. Banking
Act, proposed subsection 11CAB(3).
[61]. Banking
Act, proposed subsection 11CAC(2).
[62]. See
for example, submissions
from the Citizens Electoral Council and the Banking and Finance Consumers
Support Association (Inc.).
[63]. Banking
Act, proposed subsection 11CAB(1).
[64]. Banking
Act, subsection 12(1).
[65]. G
Turner, ‘Depositor
protection in Australia’, Reserve Bank of Australia Bulletin,
December Quarter, 2011, p. 51.
[66]. Ibid.
[67]. Ibid.,
p. 48.
[68]. ASIC,
Hybrid
securities, op. cit.
[69]. Senate
Economics Legislation Committee, Official
committee Hansard, op. cit., p. 30.
[70]. ASIC,
Hybrid
securities, op. cit., p. 11.
[71]. Senate
Economics Legislation Committee, Official
committee Hansard, op. cit; ASIC, ASIC’s
Corporate Plan 2017–18 to 2020–21, op. cit., p.29.
[72]. Financial
Conduct Authority (FCA), Restrictions
in relation to the retail distribution of contingent convertible instruments,
FCA, August 2014, p. 3.
[73]. FCA,
Restrictions
on the retail distribution of regulatory capital instruments, FCA, June
2015.
[74]. Ibid.,
p. 7.
[75]. The
Treasury, Strengthening
APRA's crisis management powers, op. cit., p. 22
[76]. See
Explanatory
Memorandum, Financial Sector Legislation Amendment (Crisis Resolution
Powers and Other Measures) Bill 2017, p. 83, paragraphs 3.81–3.82.
[77]. Banking
Act, proposed paragraph 11CA(1AA)(a)–(c). Item 42 of Schedule
1 to the Bill repeals and replaces subsection 11CA(5A) so that, amongst other
things, decisions under these paragraphs are subject to Part VI of the Banking
Act which provides for the reconsideration and review of decisions.
[78]. Banking
Act, proposed paragraph 11CA(1AA)(e).
[79]. Banking
Act, proposed paragraph 11CA(1AA)(f).
[80]. Banking
Act, proposed paragraph 11CA(1AA)(g).
[81]. Banking
Act, proposed paragraph 11CA(1AA)(h) and (k).
[82]. Banking
Act, proposed paragraph 11CA(2)(p).
[83]. Banking
Act, proposed paragraph 11CA(2)(q).
[84]. Banking
Act, proposed paragraph 11CA(2)(r).
[85]. Banking
Act, proposed subsection 13D(1). This reflects current section 13D,
except for a change in terminology from ‘ADI statutory manager’ to ‘Banking Act
statutory manager’.
[86]. Banking
Act, proposed subsections 13D(2)–(4).
[87]. Banking
Act, proposed subsections 13E(7) inserted by item 92 of
Schedule 1 to the Bill.
[88]. Banking
Act, proposed subsection 13F(1A).
[89]. The
reference is erroneous because Part 6 of the APRA Act does not operate
to impose secrecy on regulated entities or their employees, officers or
contractors. Instead it only applies to APRA staff.
[90]. Banking
Act, proposed subsection 11CH(2). Proposed subsection 11CH(4) provides
that the determination is not legislative instrument.
[91]. Banking
Act, proposed subsection 11CH(3).
[92]. Banking
Act, proposed subsection 11CI(2).
[93]. Banking
Act, proposed subsection 11CI(1).
[94]. Those
sections are section 11CJ, 11CK, 11CL, 11CM, 11CN or 11CO.
[95]. Banking
Act, proposed subsection 11CI(3).
[96]. See
section 13.3 of the Criminal
Code Act 1995.
[97]. Subsection
13.1(2) of the Criminal Code.
[98]. Banking
Act, proposed section 70AA inserted by item 252 of Schedule 1
to the Bill.
[99]. Insurance
Act, proposed section 109A inserted by item 135 of Schedule 2 to the
Bill.
[100]. Life
Insurance Act, proposed section 231A inserted by item 102 of
Schedule 3 to the Bill.
[101]. Attorney-General’s
Department, A
guide to framing Commonwealth offences, infringement notices and enforcement
powers, [Attorney-General’s Department], [Canberra],
September 2011.
[102]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 13, 2017, 15 November 2017, p. 29.
[103]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 15, 2017, 6 December 2017, pp. 62–3.
[104]. Ibid.,
p. 63.
[105]. Attorney-General’s
Department, A
guide to framing Commonwealth offences, infringement notices and enforcement
powers, op. cit., p. 50.
[106]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 15, 2017, op. cit., p. 67.
[107]. Australian
Bankers Association, Submission
to the Senate Standing Committee on Economics, Inquiry into the
Financial Sector Legislation Amendment (Crisis Resolution Powers and Other
Measures) Bill 2017 [Provisions], 18 December 2017, p. 2.
[108]. Banking
Act, proposed section 11CJ.
[109]. Banking
Act, proposed subsection 11CK(2).
[110]. Banking
Act, proposed subsection 11CK(5).
[111]. Banking
Act, proposed subsection 11CK(6).
[112]. Banking
Act, proposed section 11CL.
[113]. Subsection 3(1)
of the APRA Act defines the term APRA member as a member
of APRA, including the Chair and Deputy Chair.
[114]. Subsection 3(1)
of the APRA Act defines the term APRA staff member as a
person appointed by APRA under section 45 of the APRA Act, a person
assisting APRA under section 46 of the APRA Act or a person engaged by
APRA under section 47 of the APRA Act.
[115]. That
is, any other person who, because of his or her employment, or in the course of
that employment has acquired protected information or has had access to
protected documents—other than an employee of the body to which the information
or document relates.
[116]. Subsection
56(1) of the APRA Act defines the terms protected information and
protected document.
[117]. Banking
Act, proposed subsection 11CM(1).
[118]. Banking
Act, proposed section 11CN.
[119]. Banking
Act, proposed section 11CO.
[120]. The
Treasury, Strengthening
APRA’s crisis management powers, op. cit., p. 56.
[121]. For
instance, items 72, 75–77, 111–112, 114–117, 119–121, 123
and 125 of Schedule 1 to the Bill.
[122]. Banking
Act, proposed subsection 13A(1C).
[123]. Banking
Act, proposed paragraphs 13A(1B)(a), (c) and (d).
[124]. Banking
Act, proposed paragraph 13A(1B)(b).
[125]. The
Treasury, Strengthening
APRA’s crisis management powers, op. cit., p. 67.
[126]. Items
165–173 of Schedule 1 to the Bill amend section 15 of the Banking Act
which sets out the effect on directors of an ADI statutory manager taking
control of an ADI’s business.
[127]. Subsection
14AA(1) of the Banking Act as amended by items 133 to 135 of
Schedule 1 to the Bill permits a Banking Act statutory manager of a body corporate
to do a number of acts in relation to the company’s share capital (such as
issue, cancel or sell shares) on terms determined by the statutory manager.
[128]. Part
3 of the FSTR Act contains voluntary transfer of business provisions.
Part 4 contains compulsory transfer provisions.
[129]. Banking
Act, proposed subsection 14AAA(2).
[130]. Banking
Act, proposed subsection 14AAA(3).
[131]. Banking
Act, proposed subsections 14C(1) and (2).
[132]. Banking
Act, proposed subsection 14C(3).
[133]. Banking
Act, proposed section 14CA inserted by item 151 of Schedule 1
to the Bill.
[134]. Banking
Act, proposed subsection 14E(1).
[135]. Banking
Act, proposed subsection 14E(2).
[136]. For
the purposes of this section, a tribunal includes a reference to an industrial
tribunal and an arbitral tribunal. Banking Act, proposed subsection
15B(10).
[137]. Banking
Act, proposed subsection 15B(8).
[138]. Banking
Act, proposed subsections 15B(2) and (5).
[139]. Banking
Act, proposed subsections 15BA(1), (2) and (5).
[140]. Banking
Act, proposed subsection 15BB(1).
[141]. Banking
Act, proposed subsection 15BB(2).
[142]. Banking
Act, proposed subsection 15BC(1).
[143]. Section
600F of the Corporations Act provides that the term essential
service means electricity, gas, water or a carriage services within the
meaning of the Telecommunications
Act 1997.
[144]. Banking
Act, proposed subsection 15BD(1).
[145]. Banking
Act, proposed section 15BE.
[146]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 13, 2017, op. cit., p. 30. Equivalent measures are Insurance
Act, proposed section 62P inserted by item 33 and proposed
section 62ZOR inserted by item 58 in Schedule 2 to the Bill; and Life
Insurance Act, proposed section 161 inserted by item 28 and
proposed section 179AR inserted by item 52 in Schedule 3 to the
Bill.
[147]. Ibid.,
p. 31.
[148]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 15, 2017, op. cit., p. 69.
[149]. Banking
Act, proposed section 16AAA(5).
[150]. The
Treasury, Strengthening
APRA’s crisis management powers, op. cit., p. 60.
[151]. K
Rudd (Prime Minister), Global
financial crisis, media release, 12 October 2008.
[152]. Banking
Act, section 16AB.
[153]. Banking
Act, proposed section 16AD(1) inserted by item 215 in
Schedule 1 to the Bill.
[154]. Banking
Act, section 16AF.
[155]. Banking
Regulation, section 11.
[156]. Banking
Act, proposed subsection 16AIA(1) inserted by item 218 in
Schedule 1 to the Bill.
[157]. Banking
Act, proposed subsections 16AIC(1) and (2) inserted by item 218 in
Schedule 1 to the Bill.
[158]. Banking
Act, proposed subsection 16AIC(3) inserted by item 218 in
Schedule 1 to the Bill.
[159]. Banking
Act, proposed subsections 16AIC(4) and (5) inserted by item 218 in
Schedule 1 to the Bill.
[160]. Banking
Act, proposed subsection 11E(1). The relevant provisions are sections 12,
13BA and 13C, and Subdivision B of Division 2 (statutory management), subsections 13A(1)–(2),
to the extent that those subsections relate to statutory management and sections 62B,
62C, 62D and 62E (miscellaneous matters).
[161]. Banking
Act, proposed subsection 11E(3).
[162]. Banking
Act, proposed subsection 11EA(1).
[163]. Banking
Act, proposed subsection 11EA(4).
[164]. Banking
Act, proposed subsection 11EA(3).
[165]. D
Kehl, Liability
insurance premium increases: causes and possible government responses, Current
issues brief, 10, 2001–02, Parliamentary Library, Canberra, 19 March 2002, p.
1.
[166]. Reinsurance
is a contract of insurance taken out by the original insurer (the reinsured)
with another insurer (the reinsurer) to indemnify the reinsured against
liability or payments under the original or underlying contract of insurance. Source:
Butterworths Concise Australian Legal Dictionary, 3rd edition,
LexisNexis Butterworths, Australia, 2004, p.371.
[167]. Kehl,
Liability
insurance premium increases: causes and possible government responses,
op. cit., p. 3.
[168]. T Sykes, ‘Getting
tough on insurance: APRA rises as HIH falls’, The Australian Financial
Review, 15 March 2001; J Breusch, ‘Risk
remains after insurance crisis talks’, The Australian Financial Review,
19 March 2001; J Breusch, ‘Insurance
hike hits professionals’, The Australian Financial Review, 30 March
2001; J Breusch, ‘Life
after the insurer’s death’, The Australian Financial Review, 17
April 2001.
[169]. J
Owen, The
Failure of HIH Insurance: a corporate collapse and its lessons, vol. 1, The
Commission, Sydney, 2003.
[170]. Insurance
Act, subsection 12(4).
[171]. Banking
Act, section 13.
[172]. The
updated definition is inserted by item 5 of Schedule 2 to the Bill.
[173]. See
item 8 of Schedule 1 and discussion on page 9 of this Digest.
[174]. Insurance
Act, proposed subparagraphs 15(1)(a)(iia) and (iii) inserted by item
10 of Schedule 2 to the Bill.
[175]. Insurance
Act, proposed paragraph 15(1)(fa) inserted by item 11 of
Schedule 2 to the Bill.
[176]. Insurance
Act, proposed section 23A inserted by item 14 of Schedule 2
to the Bill.
[177]. Insurance
Act, proposed subparagraphs 32(3)(a)(v) and (vi) inserted by item
16 of Schedule 2 to the Bill.
[178]. Part
IIIA of the Insurance Act deals with prudential supervision and
monitoring of general insurers, authorised NOHCs and their subsidiaries.
[179]. Insurance
Act, proposed subsection 36B(1) inserted by item 17 of
Schedule 2 to the Bill.
[180]. Insurance
Act, subsection 62K(1).
[181]. Insurance
Act, subsections 62K(2) and (3).
[182]. Insurance
Act, subsection 62M.
[183]. Insurance
Act, proposed paragraph 62M(1)(iva) inserted by item 30 of
Schedule 2 to the Bill and proposed subsection 62M(2) inserted by item
32 of Schedule 2 to the Bill.
[184]. Insurance
Act, proposed subsections 62R(1A) and (1B) inserted by item 35 of
Schedule 2 to the Bill.
[185]. Insurance
Act, proposed subsection 62T(1) inserted by item 38 of
Schedule 2 to the Bill. See item 149 of Schedule 1 to the Bill.
[186]. Insurance
Act, proposed section 62ZM inserted by item 56 of Schedule 2
to the Bill.
[187]. Insurance
Act, proposed subsections 62ZOA(1) and (2) inserted by item 56 of
Schedule 2 to the Bill.
[188]. Insurance
Act, proposed subsections 62ZOA(3)– (7) inserted by item 56 of
Schedule 2 to the Bill.
[189]. Insurance
Act, proposed subsection 62ZOA(8).
[190]. Insurance
Act, proposed section 62ZOB.
[191]. Insurance
Act, proposed section 62ZOC.
[192]. Insurance
Act, proposed section 62ZOD.
[193]. Insurance
Act, proposed section 62ZOE.
[194]. Insurance
Act, proposed subsection 62ZOD(2) inserted by item 58 of
Schedule 2 to the Bill. See also Life Insurance Act, proposed
subsection 179AD(2) inserted by item 52 of Schedule 3 to the Bill.
[195]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 15, 2017, op. cit., p. 71.
[196]. See
also Life Insurance Act, proposed subsection 179AD(5) inserted by
item 52 of Schedule 3 to the Bill.
[197]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 13, 2017, op. cit., p. 32.
[198]. Senate
Standing Committee for the Scrutiny of Bills, Scrutiny
digest, 15, 2017, op. cit., p. 72.
[199]. Ibid.
[200]. International
Covenant on Civil and Political Rights, done in New York on 16 December
1966, [1980]
ATS 23 (entered into force for Australia (except Art. 41) on 13 November
1980; Art. 41 came into force for Australia on 28 January 1994).
[201]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 12, 2017, op. cit., p. 27.
[202]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 1, 2018, op. cit., pp. 99–102.
[203]. Insurance
Act, proposed subsection 62ZOF(1).
[204]. Insurance
Act, proposed subsection 62ZOF(2).
[205]. Insurance
Act, proposed subsection 62ZOG(1) and (2).
[206]. Insurance
Act, proposed subsection 62ZOG(4) empowers the Minister to give the
expert written notice of assumptions. The notice is not a legislative
instrument so it cannot be disallowed by the Parliament.
[207]. Insurance
Act, proposed subsection 62ZOG(3).
[208]. Insurance
Act, proposed subsection 62ZOG(8).
[209]. Insurance
Act, proposed subsection 62ZOG(9).
[210]. Insurance
Act, proposed section 62ZOK.
[211]. Insurance
Act, proposed subsection 62ZOM(1).
[212]. Insurance
Act, proposed subsection 62ZOM(2).
[213]. Insurance
Act, proposed subsection 62ZOM(3).
[214]. Insurance
Act, proposed section 62ZON.
[215]. Insurance
Act, proposed subsection 62Z00(1).
[216]. Insurance
Act, proposed subsection 62Z0Q(1).
[217]. Insurance
Act, proposed sections 62Z0R–62ZOW.
[218]. Insurance
Act, proposed subsection 62ZR(4) inserted by item 61 of
Schedule 2 to the Bill. Note that items 62 and 63 make consequential
amendments.
[219]. Insurance
Act, proposed subsection 62ZU(3) inserted by item 64 and
proposed section 62ZVA inserted by item 66 of Schedule 2 to the
Bill.
[220]. Insurance
Act, proposed paragraph 62ZW(d) inserted by item 68 of
Schedule 2 to the Bill.
[221]. Insurance
Act, proposed paragraph 62ZZC(1)(a) inserted by item 69 of
Schedule 2 to the Bill.
[222]. Insurance
Act, proposed section 62ZZFA inserted by item 71 of Schedule
2 to the Bill.
[223]. Insurance
Act, proposed section 62ZZGA inserted by item 75 of Schedule
2 to the Bill.
[224]. Insurance
Act, proposed section 62ZZMA inserted by item 84 of Schedule
2 to the Bill.
[225]. Insurance
Act, proposed section 62ZZMC inserted by item 84 of Schedule
2 to the Bill.
[226]. Insurance
Act, proposed subsection 62ZZMC(4).
[227]. Insurance
Act, proposed subsections 103A(2)–(5) inserted by item 96 of
Schedule 2 to the Bill.
[228]. Insurance
Act, proposed subsection 103B(4) inserted by item 100 of
Schedule 2 to the Bill.
[229]. Insurance
Act, proposed subsection 103C(1A)–(1C) inserted by item 101 of
Schedule 2 to the Bill.
[230]. Items
114–118 of Schedule 2 to the Bill. See items 34 to 37 of Schedule 1
to the Bill.
[231]. APRA,
‘Registered
life insurance companies’, APRA website, 13 July 2016.
[232]. ASIC,
Life
insurance: claims: an industry review, Report 498, October 2016.
[233]. ASIC,
Review
of retail life insurance advice, Report 413, October 2014, p. 5.
[234]. Ibid.
[235]. A
Uribe, ‘Life
insurers urged to co-operate on data’, The Australian Financial Review,
3 January 2018, p. 17.
[236]. M
Roddan, ‘Price
rules as tech alters life insurance’, The Australian, 8 January
2018, p. 13.
[237]. Life
Insurance Act, section 17.
[238]. Life
Insurance Act, proposed section 22 inserted by item 7 of
Schedule 3 to the Bill.
[239]. In
a criminal law offence, the proof of fault is usually a basic requirement.
However, offences of strict liability remove the fault (mental) element that
would otherwise apply, but the offence will not criminalise honest errors and a
person cannot be held liable if he, or she, had an honest and reasonable belief
that they were complying with relevant obligations.
[240]. Life
Insurance Act, proposed section 23 inserted by item 7 of
Schedule 3 to the Bill.
[241]. Under
section 4AA of the Crimes
Act 1914 a penalty unit is equivalent to $210. This means that the
maximum penalty for the offence is $63,000.
[242]. This
means that the maximum penalty is $12,600.
[243]. Life
Insurance Act, proposed section 26. A decision to revoke registration
is a reviewable decision due to the amendments to existing subsection 236(1) of
the Life Insurance Act in item 104 of Schedule 3 to the Bill.
[244]. Life
Insurance Act, proposed section 27A inserted by item 11 of
Schedule 3. A decision to give a direction to assign liabilities is a
reviewable decision due to the amendments to existing subsection 236(1) of the
Life Insurance Act in item 104 of Schedule 3 to the Bill.
[245]. Life
Insurance Act, proposed subsection 27A(4) inserted by item 11 of
Schedule 3 to the Bill. A refusal to approve the assignment of liabilities is a
reviewable decision due to the amendments to existing subsection 236(1) of the
Life Insurance Act in item 104 of Schedule 3 to the Bill.
[246]. A
decision to impose conditions on an approval to assign liabilities is a
reviewable decision due to the amendments to existing subsection 236(1) of the
Life Insurance Act in item 104 of Schedule 3 to the Bill.
[247]. Life
Insurance Act, proposed subsection 27A(5).
[248]. Life
Insurance Act, section 28A.
[249]. Life
Insurance Act, Part 8.
[250]. Life
Insurance Act, proposed subparagraphs 159(a)(iiia)–(iiic) inserted
by item 26 of Schedule 3 to the Bill.
[251]. Life
Insurance Act, proposed sections 161–161E inserted by item 28
of Schedule 3 to the Bill.
[252]. Life
Insurance Act, proposed subsections 163(1A) and (1B) inserted by
item 30 of Schedule 3 to the Bill.
[253]. Life
Insurance Act, proposed section 165 inserted by item 33 of
Schedule 3 to the Bill.
[254]. Life
Insurance Act, proposed section 179 inserted by item 51 of
Schedule 3 to the Bill.
[255]. Life
Insurance Act, proposed subsections 179AA(1) and (2) inserted by item
52 of Schedule 3 to the Bill.
[256]. Life
Insurance Act, proposed subsections 179AA(3)–(7) inserted by item
52 of Schedule 3 to the Bill.
[257]. Life
Insurance Act, proposed subsection 179AA(8).
[258]. Life
Insurance Act, proposed section 179AB.
[259]. Life
Insurance Act, proposed section 179AC.
[260]. Life
Insurance Act, proposed section 179AD.
[261]. Life
Insurance Act, proposed section 179AE.
[262]. Life
Insurance Act, proposed section 179AF.
[263]. Life
Insurance Act, proposed section 179AG.
[264]. Life
Insurance Act, proposed subsections 181(2) and 181(4) inserted by items
54 and 55 of Schedule 3 to the Bill respectively.
[265]. Life
Insurance Act, proposed subsections 183(4) and 185(1) inserted by items
57 and 60 of Schedule 3 to the Bill respectively.
[266]. Life
Insurance Act, subsection 230AB(1).
[267]. Life
Insurance Act, proposed subsections 230AB(1A) and (1B) inserted by item
68 of Schedule 3 to the Bill.
[268]. Life
Insurance Act, proposed subsection 230AB(4) inserted by item 70 of
Schedule 3 to the Bill.
[269]. Life
Insurance Act, proposed subsection 230AC(1A) inserted by item 71 of
Schedule 3 to the Bill.
[270]. Life
Insurance Act, section 230B.
[271]. Life
Insurance Act, proposed paragraphs 230B(2)(v)–(x) inserted by item
87 of Schedule 3 to the Bill.
[272]. Life
Insurance Act, proposed subsection 230B(3A) inserted by item 88 of
Schedule 3 to the Bill.
[273]. B
Heffernan, ‘Second
reading speech: Financial Sector Reform (Transfers of Business) Bill 1999’,
Senate, Debates, 30 March 1999, p. 3499.
[274]. Inserted
into the Banking Act by item 59 of Schedule 1 to the Bill; inserted into
the Insurance Act by items 1 and 66 of Schedule 2 to the Bill and
inserted into the Life Insurance Act by item 6 of Schedule 3 to the
Bill.
[275]. FSTR
Act, proposed section 25AA inserted by item 55 of Schedule 4
to the Bill.
[276]. FSTR
Act, proposed subsections 25(1DA) and 25(1G) inserted by items 47
and 52 of Schedule 4 to the Bill.
[277]. FSTR
Act, proposed paragraph 11(1)(d) inserted by item 28 of Schedule
4 to the Bill.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.