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Commonwealth act
This is Australia's foundational law governing who can operate a bank and how banks must be run. It has two core goals:
1. Controls who can call themselves a bank Only businesses approved by APRA (the Australian Prudential Regulation Authority — Australia's banking regulator) can legally take deposits from the public. Running an unauthorised banking business is a serious criminal offence carrying penalties of up to 200 penalty units (~$66,000 for individuals, much more for companies).
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Direct links to the current provisions in Banking Act 1959.
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View on official registerSourced from the Federal Register of Legislation (legislation.gov.au), CC BY 4.0.
2. APRA supervises all approved banks APRA sets detailed rules (called "prudential standards") that banks must follow — covering things like how much money they must keep in reserve, how they must manage risk, and how their executives must behave.
3. Financial Claims Scheme (your deposit guarantee) If a bank fails, certain account-holders can be paid out. This is essentially Australia's deposit guarantee scheme — protecting ordinary bank customers from losing their savings if their bank collapses.
4. APRA can intervene in struggling banks If a bank is in trouble, APRA has sweeping powers to step in, including:
5. Covered bonds Banks can issue a special type of secured debt instrument (a "covered bond") backed by a pool of assets (mainly home loans). This gives banks another way to raise funds, though with restrictions to protect depositors.
6. Rules for holding companies of banks Companies that own banks (but don't themselves operate as banks — called "NOHCs") must also be approved by APRA and follow rules.
7. Cross-border provisions The Act also covers Australian banks' relationships with New Zealand and foreign banks operating in Australia, including cooperation with New Zealand's banking regulator.
Some older parts of this Act (covering foreign exchange, gold, and interest rates) operate under different rules and aren't subject to the main protective objects of the Act.