Law of Financial Institutions and Securities BLO3405

LAW OF
FINANCIAL
INSTITUTIONS
AND SECURITIES
BLO3405
Introductions
• A little about me
• A little about you
• A little about each other
CONTACT DETAILS
NAME:
EMAIL enter email address (lower case)

(enter your details)
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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Victoria University CRICOS Provider No: 00124K (Melbourne), 02475D (Sydney)
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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LAW OF

EMAIL enter email address (lower case)

•1. Presentations (10%) Week 1-12

Section 51(xiii) Banking, other than state banking; also State

 Examples of bank-related legislation include the following

 Banking Act 1959

(iii) 3. Industry Codes a. Code of Banking Practice (2013)

 Code functions as a contract between banks adopting the code and

 Applies to defined consumers of ‘banking services’

 Sets out rights of customers, including disclosure of specified

b. E-payments Code ( replaced EFT Code)

 Originally published as Electronic Funds Transfer Code of Conduct (

 Applies to defined consumers engaging in electronic transactions (

 Sets out rights of customers, including disclosure of specified

Licenses and is Australian Prudential - Australian Prudential Regulation

Tyree, Ch 1.3.5; 2.4- 2.6.8

Companies - Registers and regulates companies

- Ensures Compliance with Corporations Act 2001 e.g

Australian Accounting Standards Board

Information -Receives and processes information relating to matters in

Auditors and liquidators Registers company auditors and liquidators

-Companies Auditors and Liquidators Disciplinary Board

Financial Markets Regulates Financial Markets

- Enforces consumer protection laws in ASIC Act

 Consumer protection Australian - Australian Competition and

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