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Financial sector levies announced



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Media Release FINANCIAL SECTOR LEVIES ANNOUNCED

The Minister for Financial Services & Regulation, Joe Hockey, today announced levies for 1999-00 that cover the supervisory costs of A ustralia’s prudentially regulated financial institutions.

These include the costs of the Australian Prudential Regulation Authority and consumer protection functions carried out by the Australian Securities and Investments Commission and the

Australian Taxation Office.

"These levies have a crucial role to play in safeguarding our financial system, and giving Australians confidence in our financial system," the Minister said.

The h o n . Joe Hockey m p

Minister for Financial Services & Regulation _

Parliament House, Canberra "*V

ACT 2600 Australia

Telephone (61 2) 6277 7230 Facsimile (61 2) 6273 4075

www.minfsr.treasury.gov.au

The levy rates applying to each industry sector are set out in the attached table.

The Minister said APRA's operational costs in 1999-00 would be less than the prudential supervision costs for all the above industries for 1998-99.

"APRA expects to achieve further economies once there is a single nationally-operating regulatory regime for all deposit-taking institutions, life and general insurance, and superannuation," the Minister said.

The levy rates take account of the transfer of regulatory responsibility from the States and Territories to the Commonwealth for building societies, credit unions and friendly societies.

Legislation providing for this transfer was passed by the Parliament on 3 June 1999. The levy on Authorised Deposit-taking Institutions provides for the same levy to be charged on banks, building societies and credit unions. Likewise, the levy on life insurers provides a single fram ework for levies

on life companies and friendly societies.

The levies have been determ ined so revenue collected from each industry will cover the costs of supervising that industry.

"It is important to note that levies imposed in the past have not always been based on full cost recovery. Levies paid by some sectors have previously cross subsidised the cost of supervising others," the Minister said.

This move towards cost recovery is in response to recommendation 104 of the Financial System Inquiry, which states that "regulatory agencies should charge each financial entity for direct services provided, and levy sectors of industry to meet the general costs of their regulation".

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The relevant industry sectors were advised last year that this principle of cost recovery w ould apply in full from 1999-00.

Review of current levy arrangements

"It is im portant to ensure that the basis for setting levies continues to be appropriate. The current arrangements are broadly based on the levies applying under the old Insurance and Superannuation Commission's regime.

"The decision to follow this approach reflected a num ber of considerations, including the need to provide continuity and minimise unnecessary disruption during the implementation of the financial sector regulation reforms in 1998 and the limited time available then to develop a more ’tailpr-m ade' arrangement.

"The financial sector's pace of change is resulting in more institutions becoming broad financial service providers rather than specialist players, such as banks or insurance companies. This development raises a question of whether the sectoral approach, underlying the current levy arrangements, will continue to be appropriate in the future."

The levy framework will be reviewed later this year with industry groups being invited to provide input to that review. Details of the review will be announced shortly.

M edia contact: M atthew Abbott, M inister's office, 02 6277 7230, 0413 076213 Tom Karp, APRA, 02 9210 3120, Ray Jones, D e p a rtm e n t^ Treasury, 02 6263 3849

The M inister's m edia releases and speeches are available on ww w .m infsr.treasury.gov.au

17 June 1999 25/99

Attachm ent

IN D U STR Y PERCENTAGE

O F ASSETS

M INIM UM MAXIMUM

NON-EXCLUDED SUPERANNUATION FUNDS

0.04% . $300 $41,000

RETIREMENT SAVINGS ACCOUNT PROVIDERS

0.04% $5,000 $18,500

LIFE INSURERS 0.02% $500 $280,000

GENERAL INSURERS 0.02% $5,000 $75,000

AUTHORISED DEPOSITĀ­ TAKING INSTITUTIONS

0.013% $500 $1,000,000

NON-OPERATING HOLDING COMPANIES FLAT RATE CHARGE OF $10,000