I move that the Bill be now read a second time.
Mr Speaker
In transferring responsibility from the States and Territories to the Commonwealth, the Commonwealth was aware that there were some parts of State and Territory laws which were not allowed for under the Commonwealth regime.
The State and Territory regulated entities such as building societies, credit unions and friendly societies along with the Commonwealth, were keen to ensure that these groups were not disadvantaged by the transfer. In fact, the Commonwealths view was that some of these provisions were very useful prudential regulation tools.
Transfers of Business was one such power. Under the State and Territory legislation, building societies, credit unions and friendly societies were able to transfer their business amongst themselves with the approval of the regulator. The Commonwealth is keen to provide a similar mechanism as it will provide an efficient and effective prudential tool for protecting depositors or policy owner monies where their institution is in severe financial hardship. It is also good to facilitate change in the industry.
This Bill contains that proposed mechanism.
As a result, the Commonwealth has carried over this useful prudential tool and extended it to all authorised deposit taking institutions and also all life insurance companies.
There are two types of transfer of business. The first is voluntary where two entities apply to the Australian Prudential Regulation Authority to transfer part or all of one entitys business to the other. If APRA is satisfied that the transfer is in the interests of depositors or policy owners, and other criteria are satisfied, then with the approval of the Minister, APRA may approve the transfer.
The second type of transfer of business is a compulsory transfer. These can only be done in limited circumstances, where the transfer is in the interests of policy owners or depositors. It is expected that in circumstances such as severe financial hardship, where an entity was no longer able to meet its financial requirements, APRA may seek the agreement of a receiving body to accept the business of the transferring body, and thus protect the interests of depositors or policy owners.
This is a proven effective and useful prudential tool that will complement APRAs other powers under the Banking Act 1959 and the Life Insurance Act 1995.
I commend the Bill to the House and present the explanatory memorandum.