On 19 April 2013 APRA released a discussion paper setting out proposed changes to the operation of Exemption Order 96. This Order exempts an RFC from the need to comply with the Banking Act 1959, provided the RFC complies with the conditions set out in the Order.
One of the proposals in the discussion paper is that from 1 July 2013 RFCs will not be able to offer at-call investments to retail customers, and by that date any existing retail at-call funds will need to be redeemed by customers or converted to debentures with a minimum 31 day maturity. Since the release of the discussion paper, APRA has received a number of enquiries and submissions which indicate some uncertainty as to when the proposals would apply if implemented. Concerns have also been expressed that the proposed implementation date for existing investments is too short, given the operational work involved.
Noting that the formal consultation does not close until today and that APRA is yet to make a final decision on the proposals, APRA has concluded that a longer transition period should be provided for existing at-call retail funds. Therefore, should APRA decide to implement the current proposals with regard to retail at-call investments, the revised timing will be:
- from 1 July 2013, no new at-call accounts are to be accepted by RFCs;
- and existing accounts at 30 June 2013 may continue to be operated at-call until 30 June 2014.
RFCs are expected to use this longer transition period to more smoothly manage the conversion of existing accounts to debentures with a minimum maturity period of 31 days, or alternatively to adjust their balance sheets through more term funding or reduced assets.
All other proposals in the discussion paper are unchanged. APRA will make a final decision on its proposals after due consideration of submissions.
If you have questions in relation to this matter, please contact Gavin Maunder, Policy Advisor on (02) 9210 3461.