Australian Prudential Regulation Authority instrument fixing charges No. 3 of 2019

Authorised deposit-taking institution (ADI). The instrument adopts the definition in section 5 of the Banking Act 1959. ADIs include banks, building societies, and credit unions. Only ADIs are eligible to apply for a CLF.

Committed Liquidity Facility (CLF). This is a facility offered by the RBA that allows ADIs to access a committed line of liquidity. It is used by ADIs to meet their Liquidity Coverage Ratio (LCR) requirements under the Basel III framework when they cannot hold enough High Quality Liquid Assets (HQLA) on their own balance sheet. The CLF is not a market product; it is a regulatory backstop. APRA assesses the appropriate size of the CLF that an ADI may recognise when calculating its LCR, based on the ADI’s application and supporting information.

Liquidity Coverage Ratio (LCR). The LCR is a prudential requirement that ADIs hold sufficient HQLA to cover net cash outflows over a 30-day stress scenario. The CLF can substitute for HQLA up to an approved limit. The assessment of that limit is the service for which charges are fixed.

Prudential Standard APS 210 - Liquidity. This is a prudential standard made under subsection 11AF(1) of the Banking Act 1959. It sets out the liquidity requirements for ADIs. Attachment A of APS 210 contains detailed provisions on the CLF. Paragraph 17 and paragraph 19 of Attachment A cover the application process. Paragraph 17 likely deals with standard applications; paragraph 19 may deal with variations or notifications. The instrument does not reproduce those paragraphs, but the charge applies to reviews under both.

APRA days. This is the metric used to determine the charge tier. An “APRA day” is not defined in the instrument but is presumably a unit of staff time used by APRA in its internal resource allocation. The charge increases stepwise with the estimated number of days. There is a significant jump from $33,000 (16-30 days) to $88,000 (31-80 days), suggesting that beyond 30 days the work is considerably more intensive, possibly involving multiple review stages or more complex ADIs.

Charge per entity and non-refundable. The charge is imposed per ADI, not per application. If an ADI has both a paragraph 17 and a paragraph 19 application in the same period, does it pay twice? The tables are separate, and each says “per entity”. The instrument does not clarify whether the same ADI could incur two charges. The non-refundable nature means the ADI must pay even if APRA ultimately refuses the application or approves a smaller CLF.

The instrument directly affects ADIs that applied to APRA under Attachment A, paragraph 17 or paragraph 19 of APS 210 for assessment of a CLF for the 2018 calendar year. The number of such ADIs is not stated, but it would include those that lacked sufficient HQLA and relied on the CLF to meet their LCR. Typically, smaller ADIs (credit unions, building societies, and some regional banks) are more dependent on the CLF than the major banks, which hold larger pools of HQLA. The instrument therefore has a disproportionate effect on smaller ADIs, for which a charge of $88,000 represents a larger share of operating costs than for a major bank.

Indirectly, the instrument affects the customers and shareholders of those ADIs, because the charge is a cost of regulatory compliance. It may also affect the RBA, which offers the CLF and must coordinate with APRA on assessments, although the RBA is not a payer.

The instrument does not affect ADIs that did not apply for a CLF for 2018. It does not affect non-ADI financial institutions, such as insurers or superannuation funds, because they are not subject to APS 210. It also does not affect ADIs that applied in other years; the charge is specific to the 2018 assessment cycle.

The timing of the instrument (11 June 2019, after the 2018 calendar year ended) means that the applications had already been made and likely assessed by APRA before the charges were fixed. This retrospective element may raise fairness concerns: ADIs may not have known the exact charge when they applied. However, APRA may have communicated estimates earlier, or the instrument formalises what had been previously indicated. The instrument does not address this.

The primary duty imposed by the instrument is the obligation of the ADI to pay the specified charge within 14 days after receiving APRA’s invoice. The invoice may be issued at any time after the instrument commences. The duty is unconditional: the charge is non-refundable and payable whether or not the ADI obtains approval for the CLF size sought. This creates a clear financial obligation that does not depend on the outcome of the application.

The instrument also implies a duty on APRA to issue an invoice if it wishes to collect the charge. APRA must determine the appropriate charge tier based on its estimate of assessment days. The instrument does not specify what an ADI can do if it disagrees with the tier estimate, but general administrative law principles (such as merits review or judicial review) would apply, though the instrument is silent on review rights.

The ADI has a right to have its application reviewed and assessed; that is the service for which the charge is paid. However, the charge is not a fee for a guaranteed outcome; it is a fee for the regulatory process. The ADI also has a right to receive an invoice before payment is due, and presumably to reasonable notice of the basis for the charge estimate.

There is no right to a refund if APRA takes fewer days than estimated. The charge is fixed by tier, not by actual days. Conversely, if APRA takes more days than the estimate, the charge does not increase beyond the tier ceiling (80 days is the highest bracket). However, if APRA’s estimate is initially placed in a lower tier but later exceeds that range, the instrument does not address whether APRA can reissue an invoice at a higher tier. The wording “estimated” suggests the tier is based on the estimate at the time of assessment, and the footnotes say the charge is “per entity” and “non-refundable”, but no provision allows for adjustment. This creates some uncertainty.

The instrument itself does not create penalties for late or non-payment. It fixes charges but does not state what happens if an ADI fails to pay within 14 days. However, the underlying APRA Act and the general law provide enforcement mechanisms. Under the APRA Act, unpaid charges under section 51 are recoverable as debts due to the Commonwealth. Further, APRA may use its supervisory powers under the Banking Act to apply pressure: non-payment of a regulatory charge could be seen as a breach of prudential requirements or as a sign of poor governance, potentially leading to higher supervisory costs, restrictions on activities, or even licence conditions. The instrument does not mention interest on late payment, but the debt recovery route would likely include statutory interest or costs.

Because the charge is non-refundable, there is no penalty for an ADI that withdraws its application after APRA has started work; the charge is still payable. This could be seen as a disincentive to frivolous applications, but it also locks in a cost for ADIs that may have legitimate reasons to withdraw.

The instrument does not specify any offence provisions. It is purely a charging instrument. Penalties would arise from other legislation or from contractual terms if the CLF agreement with the RBA conditions participation on payment of APRA’s charges. But that is not stated.

In terms of enforcement priority, if an ADI fails to pay, APRA could also refuse to process future applications or provide other services until the debt is cleared. Again, the instrument is silent, but APRA has broad discretion under its Act.

The instrument is made under the Australian Prudential Regulation Authority Act 1998, specifically paragraphs 51(1)(a) and (b). Section 51 of the APRA Act allows APRA to fix charges for services and applications, by legislative instrument. That provision must be read alongside the Legislation Act 2003, which governs registration, commencement, and disallowance of such instruments. This instrument is registered and commences on its registration date, as stated.

The instrument refers to the Banking Act 1959 for the definition of ADI (section 5) and for the power to make APS 210 (subsection 11AF(1)). The prudential standard APS 210 itself is a legislative instrument made under the Banking Act. The instrument’s charges apply specifically to applications under Attachment A of APS 210. Therefore, the legal chain is: Banking Act -> APS 210 -> Attachment A -> paragraphs 17 and 19 -> applications -> APRA review -> charges fixed by this instrument.

The instrument operates in the context of the RBA’s CLF, which is governed by agreements between the RBA and ADIs. The RBA is not a party to this instrument, but its cooperation in offering the CLF is necessary for the applications to have meaning. The charge is for APRA’s assessment, not for the RBA’s facility.

There is no stated interaction with the Corporations Act 2001 or ASIC, as this is purely prudential.

The instrument does not repeal or amend any other instruments. It is a standalone determination for 2018 charges. Similar instruments would be needed for other years. No such instruments are mentioned.

Because the charges are fixed under the APRA Act, they are not subject to GST beyond the stated inclusion; the footnotes confirm the amounts include GST, so no additional GST obligation arises.

The instrument is titled “No. 3 of 2019”, suggesting it is the third such instrument fixing charges in 2019. However, the instrument itself does not mention any earlier instruments or amendments. There is no amendment history provided in the source. The instrument appears to be a final determination for 2018 CLF charges, made in 2019. No subsequent amendments to this instrument are indicated in the text. It may have been varied by a later instrument, but that is not part of the source.

In general, APRA issues annual charging instruments for the CLF assessment. The year “2019” in the title refers to the year of making, not the year of assessment. The assessment year is 2018. So there may be a series of instruments: No. 1 of 2019 for some other charges, No. 2 of 2019, and then No. 3 of 2019. The source does not explain the numbering.

Given that this instrument was made in June 2019 for 2018 assessments, it is possible that earlier instruments covered earlier years. Without further source, we cannot confirm.

The instrument has not been amended by any subsequent instrument within the text. It is short and self-contained. Any amendment would need to be made by a new legislative instrument under the same power. There is no expiry date; it remains in force until repealed or superseded.

The source text does not refer to any litigation. There is no mention of court cases, tribunal decisions, or challenges to this instrument. This is not surprising, as the instrument is narrow, the amounts are relatively small compared to major regulatory actions, and the charge is levied only on a limited number of ADIs that have already engaged with APRA. ADIs might consider challenging the estimate of APRA days or the retrospective timing, but no known case is referenced.

Under general administrative law, an ADI could apply for judicial review of APRA’s decision to fix the charge or its estimate, arguing unreasonableness or failure to take into account relevant considerations. However, the instrument is a legislative instrument, not a decision; judicial review of the instrument itself would be difficult because it is a delegated legislative act. An ADI could argue that APRA failed to comply with the Legislation Act 2003 in making the instrument, but no such challenge appears in the public record.

There is also no reference to any related litigation on the CLF or APS 210 that might affect the interpretation of the instrument. The instrument is not mentioned in case law since it is a routine cost-recovery measure.

Thus, litigation history is a blank. The section will note that as at the date of the instrument, no litigation is identified, but ADIs retain usual rights of challenge.

Several features of the instrument can catch ADIs off guard. First, the charge is non-refundable and payable whether or not the ADI obtains approval. An ADI that applies for a CLF, has its application rejected, or receives a smaller allocation than expected, still owes the full tier amount. This contrasts with some commercial fee arrangements where payment is contingent on success. The rationale is that APRA incurs costs regardless, but it means ADIs bear the downside risk without a corresponding upside.

Second, the charge is based on APRA’s estimate of the number of assessment days, not actual days spent. An ADI has no input into that estimate, and the instrument does not provide a mechanism to dispute the estimate before or after invoicing. If APRA initially estimates 10 days ($11,000) but ends up spending 16 days, does it issue a new invoice for $33,000? The instrument does not say. The tier is fixed by estimate, but if the estimate changes during the assessment, APRA could potentially issue an amended invoice. The lack of clarity creates uncertainty.

Third, the payment timeline: the invoice may be issued “at any time” after the instrument commences. That could be years later, although administrative practicality suggests prompt invoicing. An ADI must be prepared to pay within 14 days of receipt. If the invoice is sent to the wrong contact or lost, the ADI may still be liable for late payment, even if no penalty is stated.

Fourth, the charge per entity. If an ADI is part of a corporate group, each licensed ADI within the group is a separate entity and may have to pay its own charge. The instrument does not allow for aggregated assessments or group discounts.

Fifth, the amounts are GST inclusive. That is straightforward, but some ADIs may need to confirm they can claim input tax credits if they are registered for GST. The instrument does not address tax treatment.

Sixth, the instrument applies only to 2018 CLF assessments. ADIs that delayed their applications or that applied in 2019 under a different year’s cycle are not covered. But there may be other instruments for those years that have different fee levels. An ADI must check the correct instrument for its year.

Seventh, the instrument does not state how APRA determines the day estimate. It might use factors such as the ADI’s size, balance sheet complexity, quality of submission, or past assessments. But nothing is transparent.

Compliance is straightforward: if your ADI made an application under Attachment A, paragraph 17 or 19 of APS 210 for a CLF for the 2018 calendar year, you must pay the charge specified by APRA’s invoice within 14 days of receiving it. There is no action required before receiving the invoice, but there are steps an ADI should take to avoid surprises.

First, identify whether your ADI actually submitted such an application. The applications are made to APRA, not to the RBA directly. Review internal records of 2018 correspondence with APRA regarding the CLF. If no such application was made, the instrument does not apply.

Second, if your ADI did apply, ensure that APRA has your correct invoicing contact details. Since the invoice can be issued after commencement, APRA should already have these from the application; but it is wise to confirm with APRA’s contact officer.

Third, budget for the charge. The amounts range from $11,000 to $88,000. Because the charge is non-refundable, treat it as a sunk cost once the application is lodged. The tier depends on APRA’s estimate. If you have no visibility of that estimate, you may need to set aside the maximum possible ($88,000) until the invoice arrives, then adjust.

Fourth, upon receiving the invoice, pay within 14 days. Payment methods are not specified; likely electronic funds transfer to APRA’s account as directed. Keep records of payment.

Fifth, if you believe the charge is incorrect (e.g., the estimate is wildly unreasonable), you may seek an informal discussion with APRA before paying. However, the instrument does not provide a formal objection process. If necessary, you could pay under protest and then pursue a refund via administrative review, but success is uncertain.

Sixth, for any future CLF applications in later years, note that this instrument covers only 2018. APRA will issue separate fixing instruments for each year. Familiarise yourself with the annual cycle and be aware that charges may change.

Compliance is passive: the obligation triggers only when APRA acts. There are no reporting or registration requirements in this instrument.