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Senate passes historic Cheques Bill.

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Senator the Hon. Ian Campbell







Senate passes historic Cheques Bill


BANKS will be exposed to more competitio n and small businesses will have better access to financial services after the passage through the Senate of an historic Bill which will allow building societies and credit unions to issue cheques in their own names, the Parliamentary Secretary to the Treasurer, Senator Ian Campbell, said today.


Senator Campbell said the passage of the Cheques and Payment Orders Amendment Bill 1998 would also lower costs for building societies and credit unions who will no longer have to rely on agency cheque arrangements to issue cheques.


“More competition in the financial system is always welcome, and small firms especially in rural and regional areas will reap the benefits from both more competition and the availability of cheque facilities from credit unions and building societies,” he said.


The Cheques and Payment Orders Amendment Bill 1998 will enable building societies, credit unions and their industry Special Services Providers (SSPs) to issue cheques in their own name. The extension of cheque issuing rights will begin on December 1.


“This will also enhance the efficiency and usefulness of the cheque as a financial product in the range of services offered by the financial industry to the community,” Senator Campbell said.


“Customers of building societies and credit unions will be able to draw cheques on their own financial institution or on their institution’s SSP, instead of on a bank through agency cheque arrangements as at present. This will allow greater flexibility in the cheque clearing process, reducing costs and leading o cheaper financial services,” he said.


“Consumers now have greater freedom of choice in choosing a financial institution, as products offered by building societies and credit unions will be more comparable with those offered by banks, and it will also be clear to consumers which financial institution stands behind a cheque.”


The Payment Systems and Netting Bill 1998, also passed by the Senate yesterday, will enhance the effectiveness of the new system introduced by the Reserve Bank on Monday for the settlement of high-value wholesale payments (the Real Time Gross Settlement (RTGS) system).


“This Bill will also provide greater assurance for netting arrangements for low-value retail payments in the payments system and facilitate the turnback of cheques.”


The RTGS system allows high-value payments — accounting for more than two-thirds of the value of cleared payments in Australia - to be settled on an RTGS basis, thus ensuring that each high-value payment is settled as it occurs, rather than being deferred. Deferred multilateral netting arrangements continue to apply to low-value retail payments.


The Bill will protect from the operation of the ‘Zero Hour Rule’ transactions settled through the RTGS system if a participant in the system were to go into external administration, and ensure the effectiveness of multilateral netting arrangements in the payments system, again the event of a participant’s external administration.


The Cheques and Payment Orders Amendment (Turnback of Cheques) Bill will amend the Cheques and Payments Orders Act to deem unsettled cheques drawn on that participant to be dishonoured. This will enable other participants in the payments system to reverse provisional credits or debits made to customers’ accounts in respect of those unsettled cheques — or, in other words, ‘turn back’ the unsettled cheques.


Finally, the Payment Systems and Netting Bill also provides legal certainty for close-out netting in the financial markets, and for netting undertaken in accordance with the rules governing stock and futures exchanges and associated clearing houses.


“It will put the Australian legal system supporting financial market netting on par with that in a number of OECD countries,” Senator Campbell said.


“The passage of these Bills is another important step in making Australia a world leader in financial sector regulation.”




26 June, 1998


Further information:


Senator Ian Campbell — (02) 6277 3955


Payments System and Netting Bill: Robert Patch

Department of the Treasury — (02) 6263 3967


Cheques Bills:  Brenda Berkeley

Department of the Treasury — (02) 6263 3972