APRA’s powers extended

The major provisions of the Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Act 2010 commence on 27 July 2010.

The Act expands APRA’s supervisory powers in amendments to the Banking Act and other Acts.

The Banking Amendment Regulations 2010 (No. 2) also make it clear that “a form of support that is entered into in the normal course of business is not to be considered external support” for the purpose of APRA giving directions including recapitalisation directions.

Examples of external support entered into in the normal course of business could include parent and shareholder support. Examples of support not entered into in the normal course of business could include arrangements such as industry support contracts certified under section 11CB of the Act, or support from the Government, such as the provision of a guarantee over an ADI’s obligations, an indemnity over risks on an ADI’s balance sheet, or an undertaking to provide capital support.

 

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