Footnotes
Chapter 1 - Inquiry into the Provisions of the Financial Sector Legislation Amendment Bill (No. 2) 2002
[1] Report
No. 12 of 2002 of the Selection of Bills Committee, 13 November 2002.
Chapter 2 - Background to the fit and proper test
[1]
The Basel Committee on Banking Supervision is a Committee of banking
supervisory authorities which was established by the central bank Governors of
the Group of Ten countries in 1975. It consists of senior representatives of bank
supervisory authorities and central banks from Belgium, Canada, France,
Germany, Italy, Japan, Luxembourg, Netherlands, Sweden, Switzerland, United
Kingdom and the United states.
[2]
Basel Committee on Banking Supervision, Basel Core Principles for Effective
Banking Supervision, 22 September 1997.
[3]
Reserve Bank of Australia, Bulletin, December 1997, p. 3.
Principle 25 reads: ‘Banking supervisors must require the local operations of
foreign banks to be conducted to the same high standards as are required of
domestic institutions and must have powers to share information needed by the
home country supervisors of those banks for the purpose of carrying out
consolidated supervision’. Basel Committee on Bank Supervision, Core
Principles for Effective Banking Supervision, Basel Committee on Banking
Supervision, September 1997, p. 40.
[4]
Basel Committee on Banking Supervision, Core Principles for Effective
Banking Supervision, Basel, September 1997, pp. 17–18. The Committee went
on to state that the evaluation of management ‘should involve background checks
on whether previous activities, including regulatory or judicial judgements,
raise doubts concerning their competence, sound judgement, or honesty. It is
critical that the bank’s proposed management team includes a substantial number
of individuals with a proven track record in banking. Supervisors should have
the authority to require notification of subsequent changes in directors and
senior management and to prevent such appointments if they are deemed to be
detrimental to the interests of depositors.’
[5]
Reserve Bank of Australia, Bulletin, December 1997, p. 3.
[6]
Basel Committee on Banking Supervision, Core Principles Methodology,
Basel, October 1999, p. 16.
[7]
Basel Committee on Banking Supervision, Core Principles Methodology,
Basel, October 1999, p. 17.
[8]
See paragraph 2.5 and footnote 3.
[9]
APRA, Core Principles for Effective Banking Supervision:
Self-Assessment for Australia, April 2001, p. 14.
[10]
APRA, Core Principles for Effective Banking Supervision:
Self-Assessment for Australia, April 2001, p. 14.
[11]
Explanatory Memorandum, p. 8.
Chapter 3 - Provisions of the Bill
[1]
Submission 5. The Australian Stock Exchange also supported Option
3. It submitted, ‘ASX supports Option 3 because it represents a sensible
balance between preserving the fundamental responsibilities and accountability
of the Board and senior management while reserving necessary ppowerto the
supervisor to take action if required. Option 3 also provides a flexible
approach, which can be more responsive to changed circumstances than the more
prescriptive and interventionist approach of Option 2.’ Submission 9.
[2]
Sections 24–27 of the Insurance Act 1973 deal with disqualified
persons not allowed to act for general insurers or authorised NOHCs; the
definition of a disqualified person; and APRA’s power to disqualify a person,
to determine that a person is not a disqualified person and to remove a
director or senior manager of a general insurer. Section 63 of the Insurance
Act deals with the review of certain decisions.
[3]
Submission 7, p. 3.
[4]
Submission 6, p. 2.
[5]
Bill Jones, opening statement, Committee Hansard, p. E3.
[6]
Clause 3 Subsection 5(1).
[7]
Submission 5, p. 2.
[8]
Submission 7, p. 2.
[9]
Submission 6, p. 1.
[10]
Supplementary Explanatory Memorandum, p. 1. Amendment 1 proposes to
amend item 3 by omitting the words ‘including those specified in’ and substituting
‘within the meaning of’, House of Representatives, Amendments Financial Sector
Legislation Amendment (No. 2) Bill 2002, 8 November 2002.
[11]
Bill Jones, opening statement, Committee Hansard, p. E4..
[12]
The Explanatory Memorandum stated that: ‘APRA will develop Prudential Standards requiring the board of an ADI (and authorised NOHC) to establish policies defining fit and proper standards for directors and senior managers and to monitor compliance with these standards on an ongoing basis. These Standards will also require ADIs (and their group members) to notify APRA promptly of any changes in directors and senior management and to provide it with details of these personnel. The standards will address APRA’s expectations as to minimum fit and proper criteria, ensuring the standards by which office holders will be judged are transparent.’
[13]
Explanatory Memorandum, p. 15.
[14]
Supplementary Submission 4A.
[15]
Submission 2, p. 1.
[16]
Submission 4, p. 2. See also Bill Jones, APRA, opening statement, Committee
Hansard, p. E3.
[17]
Bill Jones, opening statement, Committee Hansard, p. E3.
[18]
Bill Jones, opening statement, Committee Hansard, p. E4.
[19]
Section 51B—Reconsideration of decisions. A decision made by APRA to
disqualify a person or to revoke a disqualification is a reviewable decision
under section 51B. The refusal of APRA to make a determination that a person is
not a qualified person is also a reviewable decision under section 51B.
[20]
Section 51B(3).
[21]
Section 51C—Review of decisions.
[22]
Submission 6, p. 3.
[23]
Submission 7, p. 3.
[24]
Explanatory Memorandum, p. 8.
[25] Submission
4, p. 2.
[26]
Submission 4, p. 2.
[27]
Submission 7, p. 3.
[28]
The Supplementary Explanatory Memorandum states: this amendment
introduces a short transitional period of three months during which the
operation of new section 19, which states that disqualified persons under the
new fit and proper regime must not act for ADIs or authorised NOHCs, will be
suspended. It is considered that some regulated entities...may require time in
which to assess which persons may be disqualified under the new provisions and
for any application to be made to APRA to have them ‘undisqualified’.
[29]
Parliamentary Joint Committee on Corporations and Financial Services, Hansard,
Scrutiny of ASIC’s annual report, 2 December 2002, pp. 32, 68. ASIC informed
the Committee that ‘it is part of a bigger project we have under way to try to
make sure we make it as easy as possible for people to obtain their licence
from a process point of view while still protecting the integrity of a proper
licensing system’.
[30]
Item 24 inserts new section 62A which states that a member of a relevant group of bodies corporate commits an offence if:
- it becomes aware of any of the following matters:
- it, or another member of the group, has committed a breach of a prudential standard applying to it or to the other member, as the case may be;
- it, or another member of the group, or the group as a whole, may not be in a sound financial position;
- …and
- it fails to notify APRA of the matter immediately after it becomes aware of the matter.
[31]
Submission 7, p. 4. The Explanatory Memorandum stated under
item 24 ‘This amendment provides that an ADI, authorised NOHC or a subsidiary
of such institutions is required to promptly notify APRA of any breaches of
prudential requirements (for example, licensing conditions or the Prudential
Standards) or any information with a material bearing on the safety and
soundness of an ADI or a group to which an ADI is a member.’ p. 27.
[32]
Submission 6, p. 3.
[33]
Bill Jones, opening statement, Committee Hansard, p. E5.
[34]
ibid.
[35]
Supplementary Submission 4A.
Appendix 4 - Draft Prudential Standards and Guidance Note: Authorised Deposit-Taking Institutions
[1]
http://www.apra.gov.au/Policy/Draft-Prudential-Standards-and-Guidance-Notes-for-A...
9 December 2002