Banking (prudential standard) determination No 3 of 2014-Prudential Standard APS 001-Definitions [F2014L01649]-Concluded matters [2015] AUSStaCSDLM 60 (25 March 2015)

• Banking (prudential standard) determination No. 3 of 2014 - Prudential Standard APS 001 – Definitions [F2014L01649]

Banking (prudential standard) determination No. 3 of 2014 - Prudential Standard APS 001 – Definitions [F2014L01649]

Purpose	Determines Prudential Standard APS 001 definitions
Last day to disallow	26 March 2015
Authorising legislation	Banking Act 1959
Department	Treasury

[The committee first reported on this instrument in Delegated legislation monitor No. 1 of 2015]

Issue:

Insufficient information regarding consultation

Section 17 of the Legislative Instruments Act 2003 directs a rule-maker to be satisfied that appropriate consultation, as is reasonably practicable, has been undertaken in relation to a proposed instrument, particularly where that instrument is likely to have an effect on business. Section 18, however, provides that in some circumstances such consultation may be unnecessary or inappropriate. The ES which must accompany an instrument is required to describe the nature of any consultation that has been carried out or, if there has been no consultation, to explain why none was undertaken (section 26). With reference to these requirements, the committee notes that the ES states that 'APRA undertook a seven week consultation on the proposed consequential changes from August 2014'. While the committee does not usually interpret section 26 as requiring a highly detailed description of consultation undertaken, its usual approach is to consider an overly bare or general description, such as in this case, as not being sufficient to satisfy the requirements of the Legislative Instruments Act 2003. The committee's expectations in this regard are set out in the 'Guideline on consultation' in Appendix 2 of this report.

[The committee therefore requested further information from the minister; and requested that the ES be updated in accordance with the requirements of the Legislative Instruments Act 2003].

MINISTER'S RESPONSE:

The Assistant Treasurer advised that the Australian Prudential Regulation Authority (APRA) had consulted widely in relation to a new cross-industry Prudential Standard CPS 220 Risk Management (CPS 220) that applied to Australian Deposit-taking Institutions (ADIs), general insurers and life insurers, and Level 2 and Level 3 –groups, and that APRA had subsequently consulted more narrowly on the minor and machinery consequential amendments to existing industry-specific and cross-industry prudential standards (including this instrument):

In May 2013, APRA commenced consultation on CPS 220 and CPS 510 with the release of the discussion paper Harmonising cross-industry risk management requirements and accompanying draft versions of the two standards. These set out APRA's approach to harmonising risk management requirements across the banking and insurance industries, including the adoption of standard definitions of key concepts such as 'risk management framework', 'risk management strategy' and 'risk management declaration'. APRA also consulted separately on specific aspects of its proposals. APRA received a number of formal and informal responses to which it responded with the release in January 2014 of the response to submissions paper, Harmonising cross-industry risk management requirements, which was accompanied by final versions of CPS 220 and CPS 510.
On 24 August 2014, APRA released a letter seeking submissions on its proposed implementation of changes to a number of prudential standards applying to ADIs, general insurers, life insurers and cross-industry arising from its proposals regarding CPS 220 and CPS 510. Accompanying this letter was a draft of the relevant prudential standards, including the nine applying specifically to ADIs that have now been determined. The amendments in these standards were either minor or machinery changes or included provisions that had been addressed through the CPS 220 and CPS 510 consultation process (such as the standard definitions to be incorporated into APS 001). The letter therefore sought feedback only on errors or omissions in the draft prudential standards. APRA published its response to the four submissions it received by letter dated 8 November 2014.

The minister also provided the committee with a copy of the amended ES.

COMMITTEE RESPONSE:

The committee thanks the minister for his response.

The committee notes that its inquiries are also relevant to the instruments listed below:

• Banking, Insurance and Life Insurance (prudential standard) determination No. 1 of 2014 - Prudential Standard CPS 231 – Outsourcing [F2014L01650];

• Banking, Insurance and Life Insurance (prudential standard) determination No. 2 of 2014 - Prudential Standard CPS 232 - Business Continuity Management [F2014L01651];

• Banking (prudential standard) determination No. 8 of 2014 - Prudential Standard APS 220 - Credit Quality [F2014L01652];

• Banking (prudential standard) determination No. 4 of 2014 - Prudential Standard APS 116 - Capital Adequacy - Market Risk [F2014L01653];

• Banking (prudential standard) determination No. 9 of 2014 - Prudential Standard APS 222 - Associations with Related Entities [F2014L01654];

• Banking (prudential standard) determination No. 5 of 2014 - Prudential Standard - APS 221 - Large Exposures [F2014L01655];

• Banking (prudential standard) determination No. 6 of 2014 - Prudential Standard APS 610 - Prudential Requirements for Providers of Purchased Payment Facilities [F2014L01656];

• Banking (prudential standard) determination No. 10 of 2014 - Prudential Standard APS 310 - Audit and Related Matters [F2014L01657];

• Banking (prudential standard) determination No. 7 of 2014 - Prudential Standard APS 120 – Securitisation [F2014L01658];

• Banking (prudential standard) determination No. 11 of 2014 - Prudential Standard APS 330 - Public Disclosure [F2014L01669];

• Life Insurance (prudential standard) determination No. 1 of 2014 - Prudential Standard LPS 001 – Definitions [F2014L01670];

• Life Insurance (prudential standard) determination No. 2 of 2014 - Prudential Standard LPS 320 - Actuarial and Related Matters [F2014L01672];

• Insurance (prudential standard) determination No. 2 of 2014 - Prudential Standard GPS 001 - Definitions [F2014L01675];

• Insurance (prudential standard) determination No. 3 of 2014 - Prudential Standard GPS 110 - Capital Adequacy [F2014L01677];

• Insurance (prudential standard) determination No. 5 of 2014 - Prudential Standard GPS 310 - Audit and Related Matters [F2014L01678];

• Insurance (prudential standard) determination No. 4 of 2014 - Prudential Standard GPS 113 - Capital Adequacy: Internal Model-based Method [F2014L01679]; and

• Insurance (prudential standard) determination No. 6 of 2014 - Prudential Standard GPS 320 - Actuarial and Related Matters [F2014L01680].

Noting that the minister's response is relevant to the making of the instruments listed above, the committee has therefore concluded its examination of the instrument.