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Schedule 5—Amendment of the Payment Systems and Netting Act 1998

Schedule 5 Amendment of the Payment Systems and Netting Act 1998

Part 1 Main amendments

Payment Systems and Netting Act 1998

1  Section 5

Insert:

ADI means an authorised deposit-taking institution within the meaning of the Banking Act 1959 .

Banking Act statutory manager has the same meaning as in the Banking Act 1959 .

2  Section 5 (definition of Business Transfer Act )

Omit “ Financial Sector (Business Transfer and Group Restructure) Act 1999 ”, substitute “ Financial Sector (Transfer and Restructure) Act 1999 ”.

3  Section 5 (before paragraph (a) of the definition of direction stay provision )

Insert:

                    (aa)  subsection 11CAC(2) of the Banking Act 1959 ;

4  Section 5 (after paragraph (b) of the definition of direction stay provision )

Insert:

                   (ba)  subsection 36C(2) of the Insurance Act 1973 ;

5  Section 5 (after paragraph (d) of the definition of direction stay provision )

Insert:

                   (da)  subsection 230AAD(2) of the Life Insurance Act 1995 ;

6  Section 5 (paragraph (d) of the definition of external administration )

Repeal the paragraph, substitute:

                     (d)  a Banking Act statutory manager takes control of the person’s business under the Banking Act 1959 ; or

                   (da)  an Insurance Act statutory manager takes control of the person’s business under the Insurance Act 1973 ; or

                   (db)  a Life Insurance Act statutory manager takes control of the person’s business under the Life Insurance Act 1995 ; or

7  Section 5

Insert:

general insurer has the same meaning as in the Insurance Act 1973 .

Insurance Act statutory manager has the same meaning as in the Insurance Act 1973 .

life company has the same meaning as in the Life Insurance Act 1995 .

Life Insurance Act statutory manager has the same meaning as in the Life Insurance Act 1995 .

receiving body has the same meaning as in the Business Transfer Act.

8  Section 5 (definition of regulated body )

Repeal the definition, substitute:

regulated body means a body corporate that is any of the following:

                     (a)  an ADI;

                     (b)  a general insurer;

                     (c)  a life company;

                     (d)  an authorised NOHC (within the meaning of the Banking Act 1959 );

                     (e)  an authorised NOHC (within the meaning of the Insurance Act 1973 );

                      (f)  a registered NOHC (within the meaning of the Life Insurance Act 1995 );

                     (g)  a subsidiary of a body corporate mentioned in paragraph (a), (b), (c), (d), (e) or (f);

                     (h)  a private health insurer within the meaning of the Private Health Insurance (Prudential Supervision) Act 2015 .

9  Section 5 (definition of regulated business )

Repeal the definition, substitute:

regulated business :

                     (a)  in relation to an ADI—means the ADI’s banking business (within the meaning of the Banking Act 1959 ); and

                     (b)  in relation to a general insurer—means the general insurer’s insurance business (within the meaning of the Insurance Act 1973 ); and

                     (c)  in relation to a life company—means the life company’s life insurance business (within the meaning of the Life Insurance Act 1995 ).

10  Section 5

Insert:

related body corporate , in relation to a body corporate, means a body corporate that is related to the first-mentioned body, as determined in accordance with section 5AA.

specified moratorium provision : each of the following is a specified moratorium provision :

                     (a)  section 15BA of the Banking Act 1959 ;

                     (b)  section 15BB of the Banking Act 1959 ;

                     (c)  section 15BC of the Banking Act 1959 ;

                     (d)  section 62PA of the Insurance Act 1973 ;

                     (e)  section 62PB of the Insurance Act 1973 ;

                      (f)  section 62PC of the Insurance Act 1973 ;

                     (g)  section 62ZOS of the Insurance Act 1973 ;

                     (h)  section 62ZOT of the Insurance Act 1973 ;

                      (j)  section 62ZOU of the Insurance Act 1973 ;

                     (k)  section 161A of the Life Insurance Act 1995 ;

                      (l)  section 161B of the Life Insurance Act 1995 ;

                    (m)  section 161C of the Life Insurance Act 1995 ;

                     (n)  section 179AS of the Life Insurance Act 1995 ;

                     (o)  section 179AT of the Life Insurance Act 1995 ;

                     (p)  section 179AU of the Life Insurance Act 1995 .

11  Section 5 (after paragraph (fb) of the definition of specified provisions )

Insert:

                    (fc)  the specified moratorium provisions; and

12  Section 5 (before paragraph (a) of the definition of specified stay provision )

Insert:

                    (aa)  subsection 11CAC(2) of the Banking Act 1959 ;

13  Section 5 (after paragraph (e) of the definition of specified stay provision )

Insert:

                    (ea)  subsection 36C(2) of the Insurance Act 1973 ;

14  Section 5 (after paragraph (g) of the definition of specified stay provision )

Insert:

                    (ga)  subsection 62ZOH(2) of the Insurance Act 1973 ;

                   (gb)  subsection 62ZOX(2) of the Insurance Act 1973 ;

15  Section 5 (after paragraph (k) of the definition of specified stay provision )

Insert:

                   (ka)  subsection 179AH(2) of the Life Insurance Act 1995 ;

                   (kb)  subsection 179AX(2) of the Life Insurance Act 1995 ;

                   (kc)  subsection 230AAD(2) of the Life Insurance Act 1995 ;

16  Section 5 (paragraph (a) of the definition of statutory/judicial management )

Repeal the paragraph, substitute:

                     (a)  a Banking Act statutory manager, Insurance Act statutory manager or Life Insurance Act statutory manager has control of the person’s business; or

17  After section 5

Insert:

5AA   Meaning of related body corporate

                   For the purposes of this Act, the question whether a body corporate is related to another body corporate is to be determined in the same way as that question is determined for the purposes of the Corporations Act 2001 .

5AB   Meaning of subsidiary

                   For the purposes of this Act, the question whether a body corporate is a subsidiary of another body corporate is to be determined in the same way as that question is determined for the purposes of the Corporations Act 2001 .

18  Subsection 15A(1)

Omit “to which a regulated body is a party”.

19  Before paragraph 15A(1)(a)

Insert:

                    (aa)  a party to the contract is:

                              (i)  a regulated body; or

                             (ii)  a related body corporate of a regulated body; and

20  Subsection 15A(2)

Omit “to which a regulated body is a party”.

21  Before paragraph 15A(2)(a)

Insert:

                    (aa)  a party to the contract is:

                              (i)  a regulated body; or

                             (ii)  a related body corporate of a regulated body; and

22  Paragraph 15B(1)(a)

Omit “to which a regulated body is a party”.

23  After paragraph 15B(1)(a)

Insert:

                    (aa)  a party to the contract is:

                              (i)  a regulated body; or

                             (ii)  a related body corporate of a regulated body; and

24  After paragraph 15B(1)(b)

Omit “a party”, substitute “the party”.

25  Section 15C (heading)

Repeal the heading, substitute:

15C   When APRA may declare that non-direction stays continue—regulated body is party to trigger contract

26  Subsections 15C(1) and (2)

Repeal the subsections, substitute:

             (1)  Subsection (2) applies if:

                     (a)  a trigger event to which a specified stay provision (other than a direction stay provision) applies:

                              (i)  is an event that involves a regulated body; and

                             (ii)  happens in relation to a close-out netting contract (the trigger contract ) to which the regulated body is a party; and

                     (b)  APRA is satisfied that all the matters in subsection (3) will be satisfied in relation to the party in respect of which the declaration under subsection (2) will be made:

                              (i)  unless subparagraph (ii) applies—at the time the declaration will be made; or

                             (ii)  if a certificate of transfer will come into force under the Business Transfer Act for a transfer of business from the regulated body to a receiving body—just after that coming into force; and

                     (c)  the party in respect of which the declaration under subsection (2) will be made is not in external administration (disregarding paragraphs (d), (da), (db), (e) and (f) of the definition of external administration in section 5); and

                     (d)  APRA has not already made a declaration under section 15B in relation to the trigger event happening in relation to the trigger contract.

             (2)  APRA may, before the end of the resolution period for the trigger event, declare that the specified stay provision is to continue to apply to:

                     (a)  unless paragraph (b) or (c) applies:

                              (i)  all close-out netting contracts to which the regulated body is a party; and

                             (ii)  all securities given over financial property, in respect of obligations under those close-out netting contracts; or

                     (b)  in the case of a total transfer under the Business Transfer Act:

                              (i)  all close-out netting contracts to which the regulated body is a party (and to which the receiving body will become a party immediately after the transfer); and

                             (ii)  all securities given over financial property, in respect of obligations under those close-out netting contracts; or

                     (c)  in the case of a partial transfer under the Business Transfer Act—either or both of the following:

                              (i)  all close-out netting contracts to which the regulated body is a party (and to which the regulated body will remain a party immediately after the transfer), and all securities given over financial property in respect of obligations under those contracts;

                             (ii)  all close-out netting contracts to which the regulated body is a party (and to which the receiving body will become a party immediately after the transfer), and all securities given over financial property in respect of obligations under those contracts.

27  Paragraphs 15C(3)(c) and (d)

Repeal the paragraphs, substitute:

                     (c)  if the party is an ADI, a general insurer or a life company—that the party has each material authorisation (however described) necessary for its regulated business;

                     (d)  if minimum capital requirements under the Banking Act 1959 , the Insurance Act 1973 or the Life Insurance Act 1995 apply to the party—that either subsection (4) or subsection (5) is satisfied in respect of the party.

28  Paragraph 15C(5)(b)

Repeal the paragraph, substitute:

                     (b)  those arrangements will remain in place until at least the earliest day on which one or more of the following occurs:

                              (i)  subsection (4) is satisfied;

                             (ii)  if a Banking Act statutory manager is in control of the party’s business—APRA makes an ultimate termination of control under subsection 13C(3) of the Banking Act 1959 ;

                            (iii)  if an Insurance Act statutory manager is in control of the party’s business—APRA makes an ultimate termination of control under subsection 62ZOC(3) of the Insurance Act 1973 ;

                            (iv)  if a Life Insurance Act statutory manager is in control of the party’s business—APRA makes an ultimate termination of control under subsection 179AC(3) of the Life Insurance Act 1995 ;

                             (v)  if the party is under judicial management under the Insurance Act 1973 —an order under section 62ZF of that Act cancelling the judicial management comes into force;

                            (vi)  if the party is under judicial management under the Life Insurance Act 1995 —an order under section 172 of that Act cancelling the judicial management comes into force.

29  At the end of Division 2 of Part 4

Add:

15D   When APRA may declare that non-direction stays continue—related body corporate of regulated body is party to trigger contract

             (1)  Subsection (3) applies if:

                     (a)  a trigger event to which a specified stay provision (other than a direction stay provision) applies:

                              (i)  is an event that involves a regulated body (the trigger body ); and

                             (ii)  happens in relation to one or more close-out netting contracts (each of which is a trigger contract ) to which a related body corporate of the trigger body (the contracting body ) is a party; and

                     (b)  APRA is satisfied that all the matters in subsection (5) will be satisfied in relation to each entity covered under subsection (2):

                              (i)  unless subparagraph (ii) applies—at the time the declaration will be made; or

                             (ii)  if a certificate of transfer will come into force under the Business Transfer Act for a transfer of business from the trigger body to a receiving body—just after that coming into force; and

                     (c)  each entity covered under subsection (2) is not in external administration (disregarding paragraphs (d), (da), (db), (e) and (f) of the definition of external administration in section 5); and

                     (d)  APRA has not already made a declaration under section 15B in relation to the trigger event happening in relation to the trigger contract.

             (2)  For the purposes of paragraphs (1)(b) and (c), an entity is covered under this subsection if it is:

                     (a)  if section 15E does not apply—the trigger body; or

                     (b)  if section 15E applies because of a transfer of business under the Business Transfer Act from the trigger body to a receiving body:

                              (i)  in the case of a total transfer of business—the receiving body; or

                             (ii)  in the case of a partial transfer of business—an entity specified in a determination under subsection 15E(3).

             (3)  APRA may, before the end of the resolution period for the trigger event, make a declaration that the specified stay provision is to continue to apply to:

                     (a)  each trigger contract specified in the declaration; and

                     (b)  all securities given over financial property, in respect of obligations under each trigger contract specified in the declaration.

             (4)  APRA may specify either or both of the following in a declaration under subsection (3):

                     (a)  one or more trigger contracts;

                     (b)  one or more classes of trigger contracts.

Note:          See subsection 15E(2) for a restriction on when APRA may make a declaration under subsection (2) of this section in the case of a transfer of business from the trigger body to a receiving body.

             (5)  For the purposes of paragraph (1)(b), the matters are as follows:

                     (a)  that the entity covered under subsection (2) is able to meet all its liabilities under:

                              (i)  close-out netting contracts to which it is a party; and

                             (ii)  securities given over financial property in respect of obligations of the entity under those contracts;

                            as and when they become due and payable;

                     (b)  that the entity covered under subsection (2) is solvent (within the meaning of the Corporations Act 2001 );

                     (c)  if the entity covered under subsection (2) is an ADI, a general insurer or a life company—that the entity has each material authorisation (however described) necessary for its regulated business;

                     (d)  if minimum capital requirements under the Banking Act 1959 , the Insurance Act 1973 or the Life Insurance Act 1995 apply to the entity covered under subsection (2)—that either subsection (6) or subsection (7) is satisfied in respect of the entity covered under subsection (2).

             (6)  This subsection is satisfied if the entity’s level of capital complies with the minimum capital requirements that apply to it under:

                     (a)  the Banking Act 1959 , the Insurance Act 1973 or the Life Insurance Act 1995 (as the case requires); and

                     (b)  the applicable prudential standards made under that Act.

             (7)  This subsection is satisfied if:

                     (a)  arrangements are in place to ensure that the entity performs all its obligations under:

                              (i)  close-out netting contracts to which it is a party; and

                             (ii)  securities given over financial property in respect of obligations of the entity under those contracts;

                            as and when they are due to be performed; and

                     (b)  those arrangements will remain in place until at least the earliest day on which one or more of the following occurs:

                              (i)  subsection (6) is satisfied;

                             (ii)  if a Banking Act statutory manager is in control of the entity’s business—APRA makes an ultimate termination of control under subsection 13C(3) of the Banking Act 1959 ;

                            (iii)  if an Insurance Act statutory manager is in control of the entity’s business—APRA makes an ultimate termination of control under subsection 62ZOC(3) of the Insurance Act 1973 ;

                            (iv)  if a Life Insurance Act statutory manager is in control of the entity’s business—APRA makes an ultimate termination of control under subsection 179AC(3) of the Life Insurance Act 1995 ;

                             (v)  if the entity is under judicial management under the Insurance Act 1973 —an order under section 62ZF of that Act cancelling the judicial management comes into force;

                            (vi)  if the entity is under judicial management under the Life Insurance Act 1995 —an order under section 172 of that Act cancelling the judicial management comes into force.

             (8)  A declaration under subsection (3) cannot be varied or revoked.

             (9)  A declaration under this section is not a legislative instrument.

           (10)  The regulations may do any of the following:

                     (a)  prescribe requirements relating to how declarations under subsection (3) are to be made (including requirements relating to the content or form of declarations);

                     (b)  prescribe requirements relating to the notification or publication of declarations under subsection (3);

                     (c)  include provisions that apply to determining, either generally or for a particular purpose, the time when declarations under subsection (3) are taken to be made.

Note:          Regulations under paragraph (c) may (for example) provide that, for the purpose of this section, a declaration is taken not to have been made until certain requirements of regulations under paragraph (b) have been complied with.

15E   Declaration under subsection 15D(3)—total or partial transfer of business

             (1)  This section applies if:

                     (a)  the requirement in paragraph 15D(1)(a) is satisfied in relation to a trigger event; and

                     (b)  a certificate of transfer will come into force under the Business Transfer Act for:

                              (i)  a total transfer of business from the trigger body to a receiving body; or

                             (ii)  a partial transfer of business from the trigger body to a receiving body.

             (2)  APRA must not make a declaration under subsection 15D(3) in relation to the trigger event unless APRA is satisfied that the declaration will not have a detrimental effect on any counterparty to a close-out netting contract to which the declaration would apply.

             (3)  For the purposes of subparagraph 15D(2)(b)(ii), APRA may make a written determination specifying either or both of the following:

                     (a)  the trigger body;

                     (b)  the receiving body.

             (4)  A determination under subsection (3) cannot be varied or revoked.

             (5)  A determination under subsection (3) is not a legislative instrument.

             (6)  The regulations may do any of the following:

                     (a)  prescribe requirements relating to how determinations under subsection (3) are to be made (including requirements relating to the content or form of declarations);

                     (b)  prescribe requirements relating to the notification or publication of determinations under subsection (3);

                     (c)  include provisions that apply to determining, either generally or for a particular purpose, the time when determinations under subsection (3) are taken to be made.

Note:          Regulations under paragraph (c) may (for example) provide that, for the purpose of this section, a determination is taken not to have been made until certain requirements of regulations under paragraph (b) have been complied with.

Part 2 Application provisions

30  Interpretation

In this Part:

commencement time means the time when this item commences.

31  Application—ceasing non-direction stays for derivatives contracts

The amendments made by items 18 to 29 of this Schedule apply in relation to trigger events that happen on or after the commencement time.