Federal Register of Legislation - Australian Government

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A Bill for an Act to amend the Banking Act 1959 to keep banks accountable in setting mortgage interest rates, and for related purposes
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Registered 29 Jun 2009
Introduced Senate 25 Jun 2009

2008‑2009

 

The Parliament of the

Commonwealth of Australia

 

THE SENATE

 

 

 

 

Presented and read a first time

 

 

 

 

 

 

Banking Amendment (Keeping Banks Accountable) Bill 2009

 

No.      , 2009

 

(Senator Fielding)

 

 

 

A Bill for an Act to amend the Banking Act 1959 to keep banks accountable in setting mortgage interest rates, and for related purposes

  

  


Contents

1............ Short title............................................................................................ 1

2............ Commencement.................................................................................. 1

3............ Schedule(s).......................................................................................... 2

Schedule 1—Amendment of the Banking Act 1959                                             3

 


A Bill for an Act to amend the Banking Act 1959 to keep banks accountable in setting mortgage interest rates, and for related purposes

The Parliament of Australia enacts:

1  Short title

                   This Act may be cited as the Banking Amendment (Keeping Banks Accountable) Act 2009.

2  Commencement

             (1)  Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

 

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1.  Sections 1 to 3 and anything in this Act not elsewhere covered by this table

The day on which this Act receives the Royal Assent.

 

2.  Schedule 1

The 28th day after the day on which this Act receives the Royal Assent.

 

Note:          This table relates only to the provisions of this Act as originally passed by both Houses of the Parliament and assented to. It will not be expanded to deal with provisions inserted in this Act after assent.

             (2)  Column 3 of the table contains additional information that is not part of this Act. Information in this column may be added to or edited in any published version of this Act.

3  Schedule(s)

                   Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1Amendment of the Banking Act 1959

  

1  After Division 2C of Part II

Insert:

Division 2DMovements in mortgage interest rates

18B  Objects of Division

             (1)  While commercial banks in Australia are the beneficiaries of a substantial public guarantee of funds supporting their private profitability, the Parliament intends that those banks should act in accordance with the public interest.

             (2)  Accordingly, the objects of this Division are:

                     (a)  to give effect to the expectation that banks will set mortgage interest rates in line with movements in official interest rates;

                     (b)  to require banks to explain any decision to set interest rates contrary to movements in official interest rates;

                     (c)  to enable the Treasurer to consider whether such decisions are contrary to the public interest;

                     (d)  to enable the Treasurer to revoke the public guarantee of funds applying to any bank which sets its rates in a manner which is contrary to the public interest.

18C  Effect

                   This Division ceases to have effect at the same time as the Financial Claims Scheme ceases to have effect.

18D  Interpretation

             (1)  In this Division:

amount, in relation to a change in interest rates, is measured by the number of basis points.

bank means an ADI to which Division 2AA applies.

Financial Claims Scheme means the financial claims scheme for account‑holders with insolvent ADIs provided for by Division 2AA.

movements in official interest rates are the changes in the cash rate targets announced from time to time by the Reserve Bank following meetings of its Board.

official interest rate means the cash rate target announced by the Reserve Bank.

standard variable interest rate has the meaning given in section 18E.

             (2)  Determinations and other instruments made by the Treasurer under this Division are not legislative instruments.

18E  Standard variable interest rate

             (1)  For the purposes of this Division, a bank’s standard variable interest rate is the rate advertised by the bank as its standard variable home loan or mortgage interest rate.

             (2)  If the Treasurer considers that a bank does not advertise a rate that meets the definition in subsection (1), the Treasurer may, in writing, nominate one of the bank’s advertised interest rates as the bank’s standard variable interest rate for the purposes of this Division.

18F  Application to bank interest rate decisions

             (1)  This section applies to a bank, in relation to its decisions in setting its interest rates, if:

                     (a)  within 5 business days of a reduction in official interest rates—the bank fails to reduce its standard variable rate by at least the same amount, or at all; or

                     (b)  at any time—the bank increases its standard variable rate, other than in response to an increase in official rates; or

                     (c)  within 5 business days of an increase in official interest rates—the bank increases its standard variable rate by more than that amount.

             (2)  For the purposes of this section, successive movements in a bank’s standard variable rate announced or occurring within a period of 5 business days are taken to be one movement in rates.

Example:    A reduction in rates of 15 basis points on Monday followed by a further reduction of 10 basis points on the following Friday is taken to be a single reduction of 25 basis points.

18G  Explanation of bank decisions

             (1)  If section 18F applies to a bank the Treasurer may, in writing, require the bank, within a specified period, to explain its decisions in setting its interest rates.

             (2)  If the bank fails, within the specified period, to provide an explanation which is satisfactory to the Treasurer, the Treasurer may do either or both of the following:

                     (a)  declare that the bank’s decisions in setting its interest rates are contrary to the public interest;

                     (b)  direct the bank, in writing, to set its standard variable rate at a different rate before the end of a specified period.

18H  Treasurer may determine financial guarantee no longer applies

             (1)  If the Treasurer:

                     (a)  has declared that a bank’s decisions in setting its interest rates are contrary to the public interest; or

                     (b)  has made a direction to a bank under paragraph 18G(2)(b) with which the bank fails to comply;

the Treasurer may determine, in writing, that the Financial Claims Scheme will cease to apply in relation to that bank from a specified time.

             (2)  Division 2AA ceases to apply in relation to the bank from the time specified in the determination made under subsection (1).

             (3)  If the bank subsequently complies with a direction made under paragraph 18G(2)(b), or if the Treasurer is satisfied that it is in the public interest, the Treasurer may make an instrument revoking a determination made under subsection (1).

             (4)  If the Treasurer revokes a determination relating to a bank in accordance with subsection (3), Division 2AA applies in relation to the bank from the time the revocation is made, or from another time specified in the instrument.

18I  Treasurer may request information

             (1)  The Treasurer may give APRA, ASIC or the Reserve Bank a written request for advice or information about a matter relevant to making a determination under this Division (including a matter relating to the affairs of a bank).

             (2)  As soon as reasonably practicable after being given the request, APRA, ASIC or the Reserve Bank as the case may be, must give the Treasurer the advice or information about the matter.

             (3)  In making a decision about a determination, the Treasurer must take into account the advice and information (if any) that he or she has been given. This does not limit what the Treasurer may take into account in making the decision.