Commonwealth of Australia Bills Commonwealth of Australia Bills[Index] [Search] [Download] [Related Items] [Help]
This is a Bill, not an Act. For current law, see the Acts databases.
2013-2014-2015-2016
The Parliament of the
Commonwealth of Australia
HOUSE OF REPRESENTATIVES
Presented and read a first time
Financial System Legislation
Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(Treasury)
A Bill for an Act to amend the law in relation to
payment systems and netting and other aspects of
the financial sector, and for related purposes
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
i
Contents
1
Short title ........................................................................................... 1
2
Commencement ................................................................................. 1
3
Schedules ........................................................................................... 2
Schedule 1--Amendments
3
Part 1--Payment systems and netting
3
Payment Systems and Netting Act 1998
3
Part 2--Other amendments
24
Banking Act 1959
24
Financial Sector (Business Transfer and Group Restructure) Act 1999
24
Insurance Act 1973
26
Life Insurance Act 1995
26
Private Health Insurance (Prudential Supervision) Act 2015
27
Part 3--Application
28
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
1
A Bill for an Act to amend the law in relation to
1
payment systems and netting and other aspects of
2
the financial sector, and for related purposes
3
The Parliament of Australia enacts:
4
1 Short title
5
This Act may be cited as the Financial System Legislation
6
Amendment (Resilience and Collateral Protection) Act 2016.
7
2 Commencement
8
(1) Each provision of this Act specified in column 1 of the table
9
commences, or is taken to have commenced, in accordance with
10
column 2 of the table. Any other statement in column 2 has effect
11
according to its terms.
12
2
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
1
Commencement information
Column 1
Column 2
Column 3
Provisions
Commencement
Date/Details
1. Sections 1 to 3
and anything in
this Act not
elsewhere covered
by this table
The day this Act receives the Royal Assent.
2. Schedule 1
The 28th day after this Act receives the
Royal Assent.
Note:
This table relates only to the provisions of this Act as originally
2
enacted. It will not be amended to deal with any later amendments of
3
this Act.
4
(2) Any information in column 3 of the table is not part of this Act.
5
Information may be inserted in this column, or information in it
6
may be edited, in any published version of this Act.
7
3 Schedules
8
Legislation that is specified in a Schedule to this Act is amended or
9
repealed as set out in the applicable items in the Schedule
10
concerned, and any other item in a Schedule to this Act has effect
11
according to its terms.
12
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
3
Schedule 1--Amendments
1
Part 1--Payment systems and netting
2
Payment Systems and Netting Act 1998
3
1 Section 5
4
Insert:
5
APRA means the Australian Prudential Regulation Authority.
6
Business Transfer Act means the Financial Sector (Business
7
Transfer and Group Restructure) Act 1999.
8
derivative has the same meaning as in Chapter 7 of the
9
Corporations Act 2001.
10
direction stay provision means any of the following:
11
(a) subsection 11CD(1A) of the Banking Act 1959;
12
(b) subsection 13N(2) of the Banking Act 1959;
13
(c) subsection 103K(2) of the Insurance Act 1973;
14
(d) subsection 105(1A) of the Insurance Act 1973;
15
(e) subsection 230AJ(2) of the Life Insurance Act 1995;
16
(f) subsection 230C(1A) of the Life Insurance Act 1995;
17
(g) subsection 101(2) of the Private Health Insurance
18
(Prudential Supervision) Act 2015.
19
eligible obligation has the meaning given by section 14A.
20
2 Section 5 (at the end of the definition of external
21
administration)
22
Add:
23
; or (d) an ADI statutory manager takes control of the person's
24
business under the Banking Act 1959; or
25
(e) the person comes under judicial management under the
26
Insurance Act 1973; or
27
(f) the person, or a part of the person's business, comes under
28
judicial management under the Life Insurance Act 1995.
29
Schedule 1 Amendments
Part 1 Payment systems and netting
4
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
3 Section 5 (definition of external administrator)
1
Omit "the person's property", substitute "the property, part of the
2
property, the business, or part of the business, of the person".
3
4 Section 5
4
Insert:
5
financial property means any of the following property, regardless
6
of whether the property (or, for paragraph (h), the intermediary or
7
the account) is in Australia or elsewhere:
8
(a) a security (within the meaning of section 92 of the
9
Corporations Act 2001 (for this purpose, disregard
10
subsections 92(3) and (4) of that Act));
11
(b) a derivative;
12
(c) a financial product (within the meaning of the Corporations
13
Act 2001) that is traded on a financial market (within the
14
meaning of that Act) that is:
15
(i) operated in accordance with an Australian market
16
licence (within the meaning of that Act); or
17
(ii) exempt from the operation of Part 7.2 of that Act;
18
(d) a negotiable instrument (within the meaning of the Personal
19
Property Securities Act 2009);
20
(e) currency (whether of Australia or of any other country);
21
(f) gold, silver or platinum;
22
(g) property declared by the regulations to be financial property
23
for the purposes of this Act;
24
(h) if a person (an intermediary) maintains an account to which
25
interests in property or rights to payment or delivery of
26
property of a kind mentioned in any of paragraphs (a) to (g)
27
may be credited or debited--the rights of a person in whose
28
name the intermediary maintains the account, to the extent
29
that those rights relate to the interests in that property or the
30
rights to payment or delivery of that property;
31
(i) proceeds (including rights and property) of property that is
32
financial property;
33
but does not include any property declared by the regulations to not
34
be financial property for the purposes of this Act.
35
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
5
foreign exchange contract has the same meaning as in Chapter 7
1
of the Corporations Act 2001.
2
give security has a meaning affected by section 5A.
3
intermediated financial property means the rights mentioned in
4
paragraph (h) of the definition of financial property.
5
5 Section 5 (after paragraph (a) of the definition of market
6
netting contract)
7
Insert:
8
(aa) the rules governing the operation of a netting market, if those
9
rules have effect as a contract between a participant in the
10
netting market and one or more other persons; or
11
6 Section 5
12
Insert:
13
non-terminal administration: a person goes into non-terminal
14
administration if:
15
(a) the person goes into external administration; and
16
(b) if the person is a body corporate--the external administration
17
is not a winding up under the Corporations Act 2001 or a
18
corresponding process under a law of a foreign country; and
19
(c) if the person is an individual--the external administration is
20
not the result of the person becoming a bankrupt under the
21
Bankruptcy Act 1966, or the person having a corresponding
22
status under a law of a foreign country.
23
regulated body means:
24
(a) a body corporate that is an ADI for the purposes of the
25
Banking Act 1959; or
26
(b) a general insurer within the meaning of the Insurance Act
27
1973; or
28
(c) a body corporate that is registered under section 21 of the
29
Life Insurance Act 1995; or
30
(d) a private health insurer within the meaning of the Private
31
Health Insurance (Prudential Supervision) Act 2015.
32
regulated business, of a regulated body, means:
33
Schedule 1 Amendments
Part 1 Payment systems and netting
6
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(a) if the body is an ADI--the body's banking business (within
1
the meaning of the Banking Act 1959); or
2
(b) if the body is a general insurer--the body's insurance
3
business (within the meaning of the Insurance Act 1973); or
4
(c) if the body is a life company--the body's life insurance
5
business (within the meaning of the Life Insurance Act 1995).
6
resolution period has the meaning given by section 15A.
7
7 Section 5 (paragraphs (a) and (b) of the definition of
8
specified provisions)
9
Repeal the paragraphs, substitute:
10
(a) subsections 11CD(2) and (3), section 11F and
11
subsection 13A(3) of the Banking Act 1959; and
12
(aa) subsections 105(2) and (3) of the Insurance Act 1973; and
13
(b) section 187 and subsections 230C(2) and (3) of the Life
14
Insurance Act 1995; and
15
8 Section 5 (paragraph (d) of the definition of specified
16
provisions)
17
Omit "and 468", substitute ", 440B, 468, 556 and 588FL".
18
9 Section 5 (after paragraph (f) of the definition of specified
19
provisions)
20
Insert:
21
(fa) subsections 101(3) and (4) of the Private Health Insurance
22
(Prudential Supervision) Act 2015; and
23
(fb) sections 267 and 267A of the Personal Property Securities
24
Act 2009; and
25
10 Section 5
26
Insert:
27
specified stay provision: each of the following is a specified stay
28
provision:
29
(a) subsection 11CD(1A) of the Banking Act 1959;
30
(b) subsection 13N(2) of the Banking Act 1959;
31
(c) subsection 14AC(2) of the Banking Act 1959;
32
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
7
(d) subsection 15C(2) of the Banking Act 1959;
1
(e) subsection 36AA(2) of the Business Transfer Act;
2
(f) subsection 62V(2) of the Insurance Act 1973;
3
(g) subsection 62ZB(2) of the Insurance Act 1973;
4
(h) subsection 103K(2) of the Insurance Act 1973;
5
(i) subsection 105(1A) of the Insurance Act 1973;
6
(j) subsection 165B(2) of the Life Insurance Act 1995;
7
(k) subsection 168C(2) of the Life Insurance Act 1995;
8
(l) subsection 230AJ(2) of the Life Insurance Act 1995;
9
(m) subsection 230C(1A) of the Life Insurance Act 1995;
10
(n) subsection 101(2) of the Private Health Insurance
11
(Prudential Supervision) Act 2015.
12
statutory/judicial management: a person is under
13
statutory/judicial management if:
14
(a) an ADI statutory manager has control of the person's
15
business under the Banking Act 1959; or
16
(b) the person is under judicial management under the Insurance
17
Act 1973; or
18
(c) the person, or a part of the person's business, is under judicial
19
management under the Life Insurance Act 1995.
20
trigger event, for a close-out netting contract, means an event of a
21
kind mentioned in paragraph (a) of the definition of close-out
22
netting contract.
23
11 Section 5 (definition of voidable)
24
Omit "a payment is voidable in an external administration if", substitute
25
"an action or thing is voidable in an external administration if".
26
12 At the end of Part 1
27
Add:
28
5A Security given over a person's right to require payment or
29
performance of an obligation
30
If a person owes payment or performance of an obligation to
31
another person (an account holder):
32
Schedule 1 Amendments
Part 1 Payment systems and netting
8
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(a) the account holder may give security over the account
1
holder's right to require the payment or performance of the
2
obligation; and
3
(b) the persons to whom security may be given include the
4
person who owes the payment or the performance of the
5
obligation to the account holder.
6
Example: A person holds an account with a bank. The person may give security
7
to the bank over the person's right to require the bank to pay the
8
person money from the account.
9
13 Section 6 (heading)
10
Repeal the heading, substitute:
11
6 Winding up not to affect transactions carried out on the day of
12
appointment
13
14 Paragraph 6(1)(a)
14
After "external administration", insert "(other than non-terminal
15
administration)".
16
15 Subsection 6(2)
17
Repeal the subsection, substitute:
18
(2) This section has effect despite any other law (including the
19
specified provisions and the specified stay provisions).
20
Note:
Section 5 defines specified provisions and specified stay provision.
21
16 After section 6
22
Insert:
23
6A Non-terminal administration not to affect transactions
24
(1) If:
25
(a) a participant in an approved RTGS system goes into
26
non-terminal administration; and
27
(b) a payment or settlement transaction is executed through the
28
system at any time before the participant goes into, or while
29
the participant is in, non-terminal administration; and
30
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
9
(c) the transaction involves the payment of money, or the
1
transfer of an asset, by the participant;
2
the payment or transfer has the same effect it would have had if the
3
participant had not gone into non-terminal administration.
4
(2) This section has effect despite any other law (including the
5
specified provisions and the specified stay provisions).
6
Note:
Section 5 defines specified provisions and specified stay provision.
7
17 Paragraph 10(2)(a)
8
Before "the party may", insert "if the external administration is not a
9
non-terminal administration--".
10
18 After paragraph 10(2)(a)
11
Insert:
12
(aa) if the external administration is a non-terminal
13
administration--the party may do anything permitted or
14
required by the arrangement in order to net:
15
(i) obligations incurred before the participant goes into, or
16
while the participant is in, non-terminal administration;
17
and
18
(ii) net obligations if the obligations that are directly or
19
indirectly netted are incurred before the participant goes
20
into, or while the participant is in, non-terminal
21
administration; and
22
19 After paragraph 10(2)(e)
23
Insert:
24
; and (f) for an arrangement that is governed by the rules of a licensed
25
CS facility as defined in section 761A of the Corporations
26
Act 2001--a payment, or a transfer of property, by a party
27
under the arrangement to discharge a net obligation is not to
28
be void or voidable in the external administration; and
29
(g) paragraphs (a) to (f) apply despite:
30
(i) any disposal of rights that may be netted under the
31
arrangement; or
32
(ii) the creation of any encumbrance, or any other interest,
33
in relation to those rights; or
34
Schedule 1 Amendments
Part 1 Payment systems and netting
10
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(iii) the operation of any encumbrance, or any other interest,
1
in relation to those rights;
2
in contravention of a prohibition in the arrangement.
3
20 Subsection 10(2) (note 1)
4
Repeal the note, substitute:
5
Note 1:
Paragraphs (2)(a) and (2)(aa)--These paragraphs only authorise the
6
party to take action to arrive at a net obligation; they do not authorise
7
the party to settle the net obligation by payment or transfer of
8
property.
9
21 Subsection 10(3)
10
Repeal the subsection, substitute:
11
(3) Subsections (1) and (2) have effect despite any other law
12
(including the specified provisions and the specified stay
13
provisions).
14
Note:
Section 5 defines specified provisions and specified stay provision.
15
22 Before section 14
16
Insert:
17
Division 1--Effectiveness of close-out netting contracts
18
23 After paragraph 14(1)(c)
19
Insert:
20
(ca) security given over financial property, in respect of
21
obligations of a party to the contract, may be enforced in
22
accordance with the terms of the security, provided the terms
23
of the security are evidenced in writing (but see section 14A);
24
24 Paragraph 14(1)(d)
25
Omit "paragraph (c) applies", substitute "paragraphs (c) and (ca)
26
apply".
27
25 Subparagraph 14(1)(d)(ii)
28
After "those rights", insert "or financial property mentioned in
29
paragraph (ca)".
30
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
11
26 Subparagraph 14(1)(d)(iii)
1
After "those rights", insert "or that financial property".
2
27 Paragraph 14(1)(d)
3
Omit "prohibition in the contract", substitute "prohibition in the
4
contract, or in the security mentioned in paragraph (ca)".
5
28 After paragraph 14(2)(f)
6
Insert:
7
(fa) security given over financial property, in respect of
8
obligations of a party to the contract, may be enforced in
9
accordance with the terms of the security, provided the terms
10
of the security are evidenced in writing (but see section 14A);
11
(fb) if:
12
(i) under section 267 or 267A of the Personal Property
13
Securities Act 2009 or section 588FL of the
14
Corporations Act 2001, a security interest would, but
15
for this paragraph, vest in the grantor before the external
16
administration begins; and
17
(ii) where the security interest did not vest under one of
18
those sections before the external administration begins,
19
the security would be enforceable under paragraph (fa);
20
the security interest does not vest under that section before
21
the external administration begins;
22
29 Paragraph 14(2)(g)
23
Repeal the paragraph, substitute:
24
(g) none of the following is to be void or voidable in the external
25
administration:
26
(i) the netting or termination of obligations under the
27
contract;
28
(ii) a payment by the party to discharge a net obligation
29
under the contract;
30
(iii) the enforcement of security under paragraph (fa);
31
(h) paragraphs (c) to (g) apply despite:
32
(i) any disposal of rights that may be netted under the
33
contract; or
34
Schedule 1 Amendments
Part 1 Payment systems and netting
12
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(ii) the creation of any encumbrance, or any other interest,
1
in relation to those rights or financial property
2
mentioned in paragraph (fa); or
3
(iii) the operation of any encumbrance, or any other interest,
4
in relation to those rights or that financial property;
5
in contravention of a prohibition in the contract, or in the
6
security mentioned in paragraph (fa).
7
30 Subsections 14(3), (4) and (5)
8
Repeal the subsections, substitute:
9
(3) Subsections (1) and (2) have effect in relation to a close-out netting
10
contract:
11
(a) subject to a specified stay provision that applies to the
12
contract; and
13
(b) despite any other law (including the specified provisions).
14
Note 1:
Section 5 defines specified provisions and specified stay provision.
15
Note 2:
Division 2 sets out the circumstances in which non-direction stays
16
may cease.
17
(4) A person may not rely on the application of subsection (1) or (2) to
18
a right or obligation under a close-out netting contract if:
19
(a) the person acquired the right or obligation from another
20
person with notice that that other person, or the other party to
21
the contract, was at that time unable to pay their debts as and
22
when they became due and payable; and
23
(b) the person acquired the right or obligation otherwise than as a
24
result of the operation of section 22, 35 or 36R of the
25
Business Transfer Act.
26
(5) Subsection (1) or (2) does not apply to an obligation owed by a
27
party to a close-out netting contract to another person if:
28
(a) the party goes into external administration; and
29
(b) the party acquired the obligation otherwise than as a result of
30
the operation of section 22, 35 or 36R of the Business
31
Transfer Act; and
32
(c) subsection (6) is satisfied.
33
(6) This subsection is satisfied if any of the following are satisfied:
34
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
13
(a) the other person did not act in good faith in entering into the
1
transaction that created the terminated obligation;
2
(b) when that transaction was entered into, the other person had
3
reasonable grounds for suspecting that the party was
4
insolvent at that time or would become insolvent because of,
5
or because of matters including:
6
(i) entering into the transaction; or
7
(ii) doing an act, or making an omission, for the purposes of
8
giving effect to the transaction;
9
(c) the other person neither provided valuable consideration
10
under, nor changed their position in reliance on, that
11
transaction.
12
(7) None of the following things done by a party to a close-out netting
13
contract, while it is under statutory/judicial management and a
14
specified stay provision applies to the contract, is to be void or
15
voidable in an external administration:
16
(a) making a payment, or transferring property, to another person
17
to meet an obligation under the contract;
18
(b) creating rights or obligations in another person under the
19
contract;
20
(c) giving any security to another person in relation to the
21
contract;
22
(d) entering into one or more close-out netting contracts with
23
another person;
24
(e) doing anything mentioned in paragraph (a), (b) or (c) under a
25
close-out netting contract mentioned in paragraph (d).
26
(8) Subsection (7) does not apply to a thing mentioned in that
27
subsection done by a party to a close-out netting contract in
28
relation to another person if:
29
(a) the transaction did not result from the operation of section 22,
30
35 or 36R of the Business Transfer Act; and
31
(b) either of the following is satisfied:
32
(i) the other person did not act in good faith in entering into
33
the transaction;
34
(ii) the other person neither provided valuable consideration
35
under, nor changed their position in reliance on, the
36
transaction.
37
Schedule 1 Amendments
Part 1 Payment systems and netting
14
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(9) If security is given over financial property, in respect of obligations
1
of a party to a close-out netting contract, then:
2
(a) subsection (3) applies in relation to the security in the same
3
way as it applies in relation to the contract; and
4
(b) subsection (4) applies in relation to rights and obligations
5
under the security in the same way as it applies in relation to
6
rights and obligations under the contract; and
7
(c) subsection (5) applies in relation to an obligation owed by a
8
party to the security in the same way as it applies in relation
9
to an obligation owed by a party to the contract; and
10
(d) subsection (7) applies to things done by a party to the
11
security in relation to the security, or a right or obligation
12
under the security, in the same way as it applies in relation to
13
things done by a party to the contract in relation to the
14
contract, or a right or obligation under the contract.
15
31 After section 14
16
Insert:
17
14A Effectiveness of security given in respect of obligations under
18
close-out netting contracts
19
(1) Paragraphs 14(1)(ca) and 14(2)(fa) apply to the enforcement of
20
security over financial property, in respect of obligations of a party
21
to a close-out netting contract, only to the extent that:
22
(a) the obligations secured by the financial property, and
23
discharged through the enforcement, are:
24
(i) eligible obligations in relation to the contract; or
25
(ii) obligations under the contract of a party to the contract
26
to pay interest on an eligible obligation; or
27
(iii) obligations of a party to the contract to pay costs and
28
expenses incurred in connection with enforcing security
29
given in respect of an eligible obligation; and
30
(b) before the enforcement, the financial property is transferred
31
or otherwise dealt with so as to be in the possession or under
32
the control of:
33
(i) the secured person; or
34
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
15
(ii) another person (who is not the grantor) on behalf of the
1
secured person, under the terms of an arrangement
2
evidenced in writing; and
3
(c) the enforcement is carried out in a manner that complies with
4
section 420A of the Corporations Act 2001 (if it applies) and
5
any applicable general law duties that are not inconsistent
6
with the terms of the security.
7
Note:
Section 5 defines financial property.
8
(2) For the purposes of paragraph (1)(b), financial property is taken
9
not to be in the possession or control of a person mentioned in that
10
paragraph if, under the security, the grantor is free to deal with the
11
financial property in the ordinary course of business until the
12
secured person's interest in the financial property becomes fixed
13
and enforceable.
14
(3) Subsection (2) applies even if the secured person's interest in the
15
financial property becomes fixed and enforceable before the
16
enforcement of the security over that property mentioned in
17
subsection (1).
18
(4) Without limiting paragraph (1)(b), financial property is taken to be
19
in the possession of a person for the purposes of that paragraph if:
20
(a) in a case where there is an issuer of the financial property--
21
the person is registered by, or on behalf of, the issuer as the
22
registered owner of the financial property; or
23
(b) in a case where the financial property is intermediated
24
financial property--the person is the person in whose name
25
the intermediary maintains the account.
26
(5) Without limiting paragraph (1)(b), financial property is taken to be
27
under the control of a person for the purposes of that paragraph if:
28
(a) the financial property is intermediated financial property; and
29
(b) the intermediary is not the grantor (but may be the secured
30
person or any other person); and
31
(c) there is an agreement in force between the intermediary and
32
one or more other persons, one of which is the secured
33
person or the grantor; and
34
(d) the agreement has one or more of the following effects:
35
Schedule 1 Amendments
Part 1 Payment systems and netting
16
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(i) the person in whose name the intermediary maintains
1
the account is not able to transfer or otherwise deal with
2
the financial property;
3
(ii) the intermediary must not comply with instructions
4
given by the grantor in relation to the financial property
5
without seeking the consent of the secured person (or a
6
person who has agreed to act on the instructions of the
7
secured person);
8
(iii) the intermediary must comply, or must comply in one or
9
more specified circumstances, with instructions
10
(including instructions to debit the account) given by the
11
secured person in relation to the intermediated financial
12
property without seeking the consent of the grantor (or
13
any person who has agreed to act on the instructions of
14
the grantor).
15
(6) Without limiting paragraph (1)(b), the fact that a grantor retains a
16
right of one or more of the following kinds does not of itself stop
17
that paragraph from being satisfied:
18
(a) right to receive and withdraw income in relation to the
19
financial property;
20
(b) right to receive notices in relation to the financial property;
21
(c) right to vote in relation to the financial property;
22
(d) right to substitute other financial property that the parties
23
agree is of equivalent value for the financial property;
24
(e) right to withdraw excess financial property;
25
(f) right to determine value of financial property.
26
(7) The regulations may prescribe circumstances in which financial
27
property is, or is not, transferred or dealt with so as to be in the
28
possession or under the control of a person for the purposes of
29
paragraph (1)(b).
30
(8) An obligation is an eligible obligation in relation to a close-out
31
netting contract if the obligation is any of the following:
32
(a) an obligation under the contract of a party to the contract that
33
relates to a derivative or foreign exchange contract or is of
34
another prescribed kind;
35
(b) an obligation that results from the netting of 2 or more
36
obligations that are created under the contract that:
37
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
17
(i) must include at least one obligation covered by
1
paragraph (a); and
2
(ii) may include one or more incidental obligations that,
3
taken together, do not form a material part of the net
4
obligation;
5
(c) an obligation declared by the regulations to be an eligible
6
obligation in relation to a close-out netting contract.
7
(9) However, an obligation is not an eligible obligation in relation to a
8
close-out netting contract if it is declared by the regulations not to
9
be an eligible obligation in relation to the contract for the purposes
10
of this Act.
11
32 At the end of Part 4
12
Add:
13
Division 2--Ceasing non-direction stays for derivatives
14
contracts
15
15A Ceasing non-direction stays for derivatives contracts
16
(1) This section applies in relation to a close-out netting contract to
17
which a regulated body is a party if:
18
(a) an obligation under the contract of a party to the contract is
19
an eligible obligation in relation to the contract or is of
20
another prescribed kind; and
21
(b) a specified stay provision (other than a direction stay
22
provision) applies to a trigger event that happens in relation
23
to the contract.
24
(2) This section also applies in relation to a security given over
25
financial property, in respect of an obligation of a party to a
26
close-out netting contract to which a regulated body is a party, if:
27
(a) the obligation is an eligible obligation in relation to the
28
contract, or an obligation of a prescribed kind; and
29
(b) a specified stay provision (other than a direction stay
30
provision) applies to a trigger event that happens in relation
31
to the contract.
32
Schedule 1 Amendments
Part 1 Payment systems and netting
18
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
(3) A specified stay provision (other than a direction stay provision)
1
ceases to apply to a close-out netting contract or a security:
2
(a) at the time when a declaration under section 15B in relation
3
to the contract or security takes effect; or
4
(b) at the end of the resolution period for the trigger event, if no
5
declaration under section 15C in relation to the contract or
6
security is made during that period.
7
(4) The resolution period for a trigger event is the period starting
8
when the trigger event happens and ending:
9
(a) at midnight (by legal time in the Australian Capital Territory)
10
at the end of the first business day after the day on which the
11
trigger event happens, unless the specified stay provision is
12
subsection 36AA(2) of the Business Transfer Act; or
13
(b) for subsection 36AA(2) of the Business Transfer Act:
14
(i) if APRA makes a declaration under subsection (5)--at
15
the time the declaration is made; or
16
(ii) if a certificate of transfer under that Act comes into
17
force--just after the certificate of transfer comes into
18
force.
19
Note:
Subsection 36AA(2) of the Business Transfer Act applies indefinitely
20
if neither subparagraph (b)(i) nor (b)(ii) ends the resolution period.
21
(5) If:
22
(a) a trigger event happens to which subsection 36AA(2) of the
23
Business Transfer Act applies; and
24
(b) the trigger event is the fact that an act is done for the
25
purposes of Division 2 or 3 of Part 4 of that Act; and
26
(c) APRA is satisfied that APRA will not issue a certificate of
27
transfer under that Act;
28
APRA may declare, in writing, that the resolution period for that
29
trigger event ends.
30
(6) A declaration under subsection (5) is not a legislative instrument.
31
15B When APRA may declare that non-direction stays cease
32
(1) Subsection (2) applies if:
33
(a) a trigger event to which a specified stay provision (other than
34
a direction stay provision) applies happens in relation to a
35
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
19
close-out netting contract to which a regulated body is a
1
party; and
2
(b) APRA is satisfied that APRA will not make a declaration
3
under section 15C in relation to a party before the end of the
4
resolution period for the trigger event.
5
(2) APRA may, before the end of the resolution period for the trigger
6
event, declare that the specified stay provision is to cease to apply
7
to:
8
(a) all close-out netting contracts of the party; and
9
(b) all securities given over financial property, in respect of
10
obligations of the party under all close-out netting contracts
11
of the party.
12
(3) A declaration under subsection (2) takes effect:
13
(a) if the declaration specifies a time before the end of the
14
resolution period when the specified stay provision is to
15
cease to apply--at the specified time; or
16
(b) in any other case--at the time when the declaration is made.
17
(4) A declaration under subsection (2) cannot be varied or revoked.
18
(5) If a declaration under subsection (2) is in writing, the declaration is
19
not a legislative instrument.
20
(6) The regulations may do any of the following:
21
(a) prescribe requirements relating to how declarations under
22
subsection (2) are to be made (including requirements
23
relating to the content or form of declarations);
24
(b) prescribe requirements relating to the notification or
25
publication of declarations under subsection (2);
26
(c) include provisions that apply to determining, either generally
27
or for a particular purpose, the time when declarations under
28
subsection (2) are taken to be made.
29
Note:
Regulations under paragraph (c) may (for example) provide that, for
30
the purpose of this section, a declaration is taken not to have been
31
made until certain requirements of regulations under paragraph (b)
32
have been complied with.
33
Schedule 1 Amendments
Part 1 Payment systems and netting
20
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
15C When APRA may declare that non-direction stays continue
1
(1) Subsection (2) applies if:
2
(a) a trigger event to which a specified stay provision (other than
3
a direction stay provision) applies happens in relation to a
4
close-out netting contract to which a regulated body is a
5
party; and
6
(b) APRA is satisfied that all the matters in subsection (3) will be
7
satisfied in relation to the party in respect of which the
8
declaration under subsection (2) will be made:
9
(i) unless subparagraph (ii) applies--at the time the
10
declaration will be made; or
11
(ii) if a certificate of transfer will come into force under the
12
Business Transfer Act--just after that coming into
13
force; and
14
(c) the party in respect of which the declaration under
15
subsection (2) will be made is not in external administration
16
(disregarding paragraphs (d), (e) and (f) of the definition of
17
external administration in section 5); and
18
(d) APRA has not already made a declaration under section 15B.
19
(2) APRA may, before the end of the resolution period for the trigger
20
event, declare that the specified stay provision is to continue to
21
apply to:
22
(a) unless paragraph (b) or (c) applies:
23
(i) all close-out netting contracts to which the regulated
24
body is a party; and
25
(ii) all securities given over financial property, in respect of
26
obligations under those close-out netting contracts; or
27
(b) if a certificate of transfer for a total transfer will come into
28
force under the Business Transfer Act:
29
(i) all close-out netting contracts to which the receiving
30
body (within the meaning of that Act) will become a
31
party; and
32
(ii) all securities given over financial property, in respect of
33
obligations under those close-out netting contracts; or
34
(c) if a certificate of transfer for a partial transfer will come into
35
force under the Business Transfer Act--either or both of the
36
following:
37
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
21
(i) all close-out netting contracts to which the transferring
1
body (within the meaning of that Act) is a party, and all
2
securities given over financial property in respect of
3
obligations under those contracts;
4
(ii) all close-out netting contracts to which the receiving
5
body (within the meaning of that Act) will become a
6
party, and all securities given over financial property in
7
respect of obligations under those contracts.
8
(3) For the purposes of paragraph (1)(b), the matters are as follows:
9
(a) that the party is able to meet all its liabilities under:
10
(i) close-out netting contracts to which it is a party; and
11
(ii) securities given over financial property in respect of
12
obligations of the party under those contracts;
13
as and when they become due and payable;
14
(b) that the party is solvent (within the meaning of the
15
Corporations Act 2001);
16
(c) that the party has each material authorisation (however
17
described) necessary for its regulated business;
18
(d) that either subsection (4) or subsection (5) is satisfied.
19
(4) This subsection is satisfied if the party's level of capital complies
20
with the minimum capital requirements that apply to it under:
21
(a) the Banking Act 1959, the Insurance Act 1973 or the Life
22
Insurance Act 1995 (as the case requires); and
23
(b) the applicable prudential standards made under that Act.
24
(5) This subsection is satisfied if:
25
(a) arrangements are in place to ensure that the party performs
26
all its obligations under:
27
(i) close-out netting contracts to which it is a party; and
28
(ii) securities given over financial property in respect of
29
obligations of the party under those contracts;
30
as and when they are due to be performed; and
31
(b) those arrangements will remain in place until at least the
32
earliest day on which one or more of the following occurs:
33
(i) subsection (4) is satisfied;
34
(ii) for subsection 15C(2) of the Banking Act 1959 (ADI
35
statutory manager in control)--APRA makes an
36
Schedule 1 Amendments
Part 1 Payment systems and netting
22
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
ultimate termination of control under subsection 13C(3)
1
of that Act;
2
(iii) for subsection 62V(2) of the Insurance Act 1973
3
(judicial manager in control)--an order under
4
section 62ZF of that Act cancelling the judicial
5
management comes into force;
6
(iv) for subsection 165B(2) of the Life Insurance Act 1995
7
(judicial manager in control)--an order under
8
section 172 of that Act cancelling the judicial
9
management comes into force.
10
(6) A declaration under subsection (2) cannot be varied or revoked.
11
(7) A declaration under this section is not a legislative instrument.
12
(8) The regulations may do any of the following:
13
(a) prescribe requirements relating to how declarations under
14
subsection (2) are to be made (including requirements
15
relating to the content or form of declarations);
16
(b) prescribe requirements relating to the notification or
17
publication of declarations under subsection (2);
18
(c) include provisions that apply to determining, either generally
19
or for a particular purpose, the time when declarations under
20
subsection (2) are taken to be made.
21
Note:
Regulations under paragraph (c) may (for example) provide that, for
22
the purpose of this section, a declaration is taken not to have been
23
made until certain requirements of regulations under paragraph (b)
24
have been complied with.
25
33 Subparagraph 16(2)(g)(iii)
26
Omit "to pay a deposit or margin call".
27
34 After paragraph 16(2)(g)
28
Insert:
29
; (h) paragraphs (c) to (g) apply despite:
30
(i) any disposal of rights that may be netted under the
31
contract; or
32
(ii) any disposal of rights or property that may be
33
transferred in accordance with the contract; or
34
Amendments Schedule 1
Payment systems and netting Part 1
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
23
(iii) the creation of any encumbrance, or any other interest,
1
in relation to those rights or property over which
2
security mentioned in paragraph (fa) is given; or
3
(iv) the operation of any encumbrance, or any other interest,
4
in relation to those rights or that property;
5
in contravention of a prohibition in the contract, or in the
6
security mentioned in paragraph (fa).
7
35 Subsection 16(3)
8
Repeal the subsection, substitute:
9
(3) Subsections (1) and (2) have effect despite any other law
10
(including the specified provisions and the specified stay
11
provisions).
12
Note:
Section 5 defines specified provisions and specified stay provision.
13
Schedule 1 Amendments
Part 2 Other amendments
24
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
Part 2--Other amendments
1
Banking Act 1959
2
36 After paragraph 11CD(1A)(c)
3
Insert:
4
; (d) enforce any security under that contract.
5
37 Subsection 11CD(1A)
6
After "subsections (2) and (3)", insert "of this section and section 31B".
7
38 At the end of subsections 13N(2) and 14AC(2)
8
Add:
9
; (d) enforce any security under that contract.
10
39 At the end of subsection 15C(2)
11
Add:
12
; (d) enforce any security under that contract.
13
This subsection has effect subject to section 31B.
14
Financial Sector (Business Transfer and Group Restructure)
15
Act 1999
16
40 Subsection 4(1)
17
Insert:
18
approved netting arrangement has the same meaning as in the
19
Payment Systems and Netting Act 1998.
20
close-out netting contract has the same meaning as in the Payment
21
Systems and Netting Act 1998.
22
market netting contract has the same meaning as in the Payment
23
Systems and Netting Act 1998.
24
41 At the end of subsection 36AA(2)
25
Add:
26
Amendments Schedule 1
Other amendments Part 2
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
25
; (d) enforce any security under that contract.
1
42 After section 36AA
2
Insert:
3
36AB Partial transfer of netting contracts void
4
(1) This section applies if:
5
(a) a certificate of transfer comes into force in respect of a partial
6
transfer; and
7
(b) just before the partial transfer, the transferring body is a party
8
to:
9
(i) a close-out netting contract; or
10
(ii) a security given over financial property, in respect of an
11
obligation of the transferring body under a close-out
12
netting contract; or
13
(iii) a market netting contract; or
14
(iv) a security given over property, in respect of an
15
obligation of the transferring body under a market
16
netting contract; or
17
(v) an approved netting arrangement; and
18
(c) the partial transfer covers some (but not all) of the following
19
assets and liabilities:
20
(i) the assets and liabilities the body has, under the
21
close-out netting contract, market netting contract or
22
approved netting arrangement, with respect to another
23
party to the contract or arrangement (the counterparty);
24
(ii) those assets that are property over which security is
25
given in respect of an obligation of the transferring body
26
under the close-out netting contract or the market
27
netting contract.
28
Note:
The Payment Systems and Netting Act 1998 affects what the assets and
29
liabilities of a party to a close-out netting contract, market netting
30
contract or approved netting arrangement are taken to include.
31
(2) The partial transfer is void:
32
(a) to the extent of the assets or liabilities the transferring body
33
has, just before the partial transfer, under the close-out
34
Schedule 1 Amendments
Part 2 Other amendments
26
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
netting contract, market netting contract or approved netting
1
arrangement, with respect to the counterparty; and
2
(b) if security is given over financial property in respect of an
3
obligation of the transferring body under a close-out netting
4
contract--to the extent that the assets are financial property
5
in the possession or control of one of the following persons
6
just before the partial transfer:
7
(i) the counterparty;
8
(ii) another person (who is not the transferring body) on
9
behalf of the counterparty, under the terms of an
10
arrangement evidenced in writing; and
11
(c) if security is given over property in respect of an obligation
12
of the transferring body under a market netting contract--to
13
the extent that the assets are that property.
14
Insurance Act 1973
15
43 At the end of subsections 62V(2), 62ZB(2) and 103K(2)
16
Add:
17
; (d) enforce any security under that contract.
18
44 After paragraph 105(1A)(c)
19
Insert:
20
; (d) enforce any security under that contract.
21
Life Insurance Act 1995
22
45 At the end of subsections 165B(2), 168C(2) and 230AJ(2)
23
Add:
24
; (d) enforce any security under that contract.
25
46 After paragraph 230C(1A)(c)
26
Insert:
27
; (d) enforce any security under that contract.
28
Amendments Schedule 1
Other amendments Part 2
No. , 2016
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
27
Private Health Insurance (Prudential Supervision) Act 2015
1
47 After paragraph 101(2)(c)
2
Insert:
3
; (d) enforce any security under that contract.
4
Schedule 1 Amendments
Part 3 Application
28
Financial System Legislation Amendment (Resilience and Collateral
Protection) Bill 2016
No. , 2016
Part 3--Application
1
48 Application of amendments
2
(1)
In this item:
3
start time means the commencement of this Schedule.
4
(2)
The amendments made by Part 1 apply in relation to approved netting
5
arrangements, market netting contracts and close-out netting contracts
6
entered into after the start time, or that are in existence immediately
7
before the start time.
8
(3)
Subject to subitem (6), the amendments made by Part 1 do not apply in
9
relation to an external administration that commenced before the start
10
time.
11
(4)
The amendments made by Part 1 apply in relation to trigger events that
12
occur for a close-out netting contract after the start time.
13
(5)
The following do not apply to disposals of rights or property, or the
14
creation or operation of encumbrances or interests, before the start time:
15
(a) the amendments made by items 24 to 27;
16
(b) paragraph 10(2)(g) of the Payment Systems and Netting Act
17
1998, as inserted by item 19;
18
(c) paragraph 14(2)(h) of the Payment Systems and Netting Act
19
1998, as inserted by item 29;
20
(d) paragraph 16(2)(h) of the Payment Systems and Netting Act
21
1998, as inserted by item 34.
22
(6)
The amendment made by item 30 applies in relation to a person being in
23
external administration, whether the external administration commences
24
before or after the start time.
25
(7)
The amendment made by item 42 applies to a partial transfer if the
26
certificate of transfer comes into force after the start time.
27
(8)
The amendments made by Parts 1 and 2 apply in relation to the
28
enforcement of a security after the start time, even if the security was
29
given before the start time.
30