LAW OF
FINANCIAL
INSTITUTIONS
AND SECURITIES
BLO3405
Introductions
• A little about me
• A little about you
• A little about each other
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What is the Unit about
• Introduction to the Australian Banking System and Regulations
• Banker and Customer
• Accounts
• Banker’s Rights and duties
• Securities - Part A - Secured Lending
• Securities - Part B - Guarantees, Banker’s Liens and Freezing Orders
• Payment and Payment systems
• Mistake and consumer protection
• Bills of exchange
• Cheques
• Insolvency
• Documentary Credit
• Bank accounts
• Future developments
Assessment
Assessments:
•1. Presentations (10%) Week 1-12
•2. Written Assignment (40%) Week 6 and week 10
•3.Final Examination (50%) TBA
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Introduction to the
Australian Banking
System and
Regulations
Week One
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Introduction to the Australian
Banking System
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The Commonwealth Constitution
• Under the Cth Constitution s 51(xiii), the federal govt has power to
make laws with respect to banking
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Main Players in the Australian
Financial System
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Nature and Scope of Law
Regulating Financial Institutions in
Australia
(a) Sources of Banking Law
1. Common law Judge-made law
Includes law of contract; law of trusts; property law ( as modified by
legislation, below)
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(ii) 2. Legislation Law made by Parliament.
Also known as ‘Acts’ or ‘Statutes’. ‘Legislation’ may also include
‘regulations’ (aka subordinate legislation)
Commonwealth Parliament is given the power by the
Commonwealth Constitution to make laws in relation to, inter alia:
Section 51(xiii) Banking, other than state banking; also State
banking extending beyond the limits of the State concerned;
the incorporation of banks, and the issue of paper money
Examples of bank-related legislation include the following
Commonwealth or Federal Acts:
Banking Act 1959
Reserve Bank Act 1959
Australian Prudential Regulation Authority Act 1998
Cheques Act 1986
Privacy Act 1988
Financial Transaction Reports Act 1988 and Anti-
moneylaundering Counter-terrorism Financing Act 2006 (Cth)
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moneylaundering Counter-terrorism Financing Act 2006 (Cth)
(iii) 3. Industry Codes a. Code of Banking Practice (2013)
( See Topic 6)
Original version published as 1993 Code, subsequently amended
resulting in latest 2013 edition
Code functions as a contract between banks adopting the code and
defined customers but it does not have the ‘force of law’ as
legislation (above)
Applies to defined consumers of ‘banking services’
Sets out rights of customers, including disclosure of specified
information, and recourse to External Dispute Resolution services in
the event of disputes between customers and their banks
b. E-payments Code ( replaced EFT Code)
Originally published as Electronic Funds Transfer Code of Conduct (
EFT Code), with subsequent amendments, until it was replaced by
the e-Payments Code ( fully operative in March 2013)
Applies to defined consumers engaging in electronic transactions (
including banking) e.g internet banking; on-line credit card
purchases; EFTPOS and ATM transactions
Sets out rights of customers, including disclosure of specified
information; liability for unauthorised electronic transactions; and
recourse to External Dispute Resolution services in the event of
disputes between customers and their banks
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It is necessary because banks have
tendency to run for profit without enough
risk assessments.
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3. Financial Deregulation =no
regulation
•(a) Deregulatory steps taken since 1980's include:
•- removal of official controls on all bank interest rates
•- floating of the exchange rate and removal of exchange rate controls
(1983)
•- entry of new players such as foreign banks and new domestic banks
(1985)
• introduction of new system of regulation based on prudential guidelines and
monitoring ( based on Wallis Report, 1997)
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• (b) Wallis Enquiry
• Terms of reference:
• Report on effects of deregulation since 1981
• Identify factors driving change:
• Technological
• Competitive (domestic and international)
• Consumer needs
• Make recommendations concerning:
• Establishment of consistent regulatory framework
• Promotion of efficient and cost-effective services for users
• Competition in the banking sector
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Current regulatory model as a
result of Wallis Enquiry
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Financial Regulators
1. Regulator Key Enabling Law Examples of laws the
function * Regulator administers
Central Reserve Bank - Reserve Bank Act 1959
Reserve Bank Of Australia Bank role of Australia
(RBA) Act 1959 - Payments Systems
Payment Regulation Act 1988
Systems
Board
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2. Regulator Key function Enabling Law * Examples of laws the
Regulator administers
Licenses and is Australian Prudential - Australian Prudential Regulation
responsible for Regulation Authority Authority Act 1998
prudential Act 1998
Australian Prudential Regulation Authority supervision of
(APRA) financial - Banking Act 1959
institutions,
including banks
Tyree Ch 2.31- 2.3.2
Tyree, Ch 1.3.5; 2.4- 2.6.8
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Field Focus Involvement of Other Regulators
Companies - Registers and regulates companies
- Ensures Compliance with Corporations Act 2001 e.g
- Investigates breaches of the Act
ASX: for listed public companies
Australian Accounting Standards Board
Information -Receives and processes information relating to matters in
this table
-Maintains registers of:
- companies
- financial services providers
- registered auditors and
Liquidators
- Business names ( of all kinds of
businesses, not just companies)
Auditors and liquidators Registers company auditors and liquidators
-Auditing and Assurance Standards Board
-Companies Auditors and Liquidators Disciplinary Board
Financial Markets Regulates Financial Markets
e.g stock market (ASX)
ASX: for listed public companies only www.asx.com.au
Financial Services - Licenses financial service providers APRA- establishes prudential standards for certain
( including consumer credit ) financial service
- Administers ‘Financial Services Regulation’ which providers
includes supervision of Financial services
organisations and professionals who deal or advise
in:
o Investments
o Superannuation
o Insurance
o Taking of deposits
- Enforces consumer protection laws in ASIC Act
and Corporations Act in relation to consumers of
financial services
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4. Regulator Key function Enabling Law * Examples of laws the
Regulator administers
Consumer protection Australian - Australian Competition and
regulator Competition and Consumer Commission Act
Consumer 2010 ( formerly Trade
Regulates Commission Act Practices Act 1974)
Australian Competition and Consumer 2010 ( formerly
competition policy
Commission known as the
and unfair business
(ACCC) Trade Practices
practices
Act 1974)
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