Mr COSTELLO (Treasurer) (9:43 AM) —I move:

That the bill be now read a second time.

The purpose of this bill, as well as the other levy bills which form part of this legislative package, is to impose levies on those industries that will be prudentially regulated by the Australian Prudential Regulation Authority, APRA. These levies will fund both APRA and the cost of additional consumer protection functions in the financial system undertaken by the Australian Securities and Investments Commission, ASIC. Essentially, the levies will ensure that the cost of regulation is met by those who benefit from it.

These bills allow for a levy to be charged on the entity being supervised according to a percentage of the assets held by the entity, subject to minimum and maximum levy amounts. The rates, thresholds and limits will be determined by the Treasurer. This will ensure that the levy paid by each class of entity reflects the actual cost of supervising those entities and the benefits to entities and their customers of supervision. At present, the different regulatory authorities have separate funding mechanisms, which have significant disparities between the nature and level of funding associated with them. These funding disparities can act to create significant cost disadvantages for one category of financial institution vis-a-vis another.

The government's aim is to establish an administratively simple and uniform scheme based on the principle of full cost recovery from the institutional categories that are regulated. Separate provision is made for charges for direct services provided—such as licences—but the major part of the cost of supervision will be met by an annual levy sufficient to cover the costs of its operations. It will be broadly similar in nature to the financial charges that building societies, credit unions, insurance companies and superannuation funds already pay. The banks at present are effectively `charged' through interest forgone on non-callable deposits held by the Reserve Bank.

With the exception of the banks, the net financial effect on the institutions will be small; some institutions may fare better and some worse, and existing cross subsidies favouring some sectors will be removed. Separate levy bills have been drafted for each industry. This will provide the flexibility to determine the levy on each industry according to the actual cost of regulating that particular industry.

This bill provides for a levy to be paid by the banks for the first time. The banks will, however, no longer forego a much greater amount of income on non-callable deposits. It is envisaged that once the deposit-taking institutions currently regulated by the states and territories come within APRA's jurisdiction, then they too will transfer from their existing cost recovery regime and be subject to the levy provisions of this bill.

This bill will commence on 1 July 1999 or when the supervision of non-bank deposit-taking institutions is transferred from the states. The other Levy Bills will commence on the same day as the Australian Prudential Regulations Authority (APRA). I commend the bill to the House. I present the explanatory memorandum to this bill, which is also the explanatory memorandum to the other Levy Bills and the Financial Institutions Supervisory Levies Collection Bill 1998.

Debate (on motion by Dr Theophanous) adjourned.