Post-implementation Review – Treasury
In December 2010, the then Government announced that it would amend the Banking Act 1959 to allow Authorised Deposit‑taking Institutions (ADIs) (such as banks) to issue covered bonds. This reform was part of the Competitive and Sustainable Banking Package. Covered bonds are a secured debt instrument which Australian ADIs were prevented from issuing by the banking legislation existing at that time. The amended legislation, which was passed in October 2011, was designed to ensure that covered bondholders have recourse to a specified pool of high quality assets – the cover pool of assets, which are set aside and cannot be used by the ADI for another purpose. Should an ADI fail, the covered bond holders would have a claim on the covered pool of assets ahead of all other creditors and, if an ADI did not meet its payments, holders of covered bonds would have mechanisms in place to recover their investment. A Regulation Impact Statement was required at the time the decision was made, but was exempted from the best practice regulation requirements by the then Prime Minister. Consequently a post-implementation review (PIR) was required. A PIR was completed by the Treasury in consultation with its Ministerial Advisory Council and was assessed as compliant by the Office of Best Practice Regulation. The PIR found the proposal imposed an annual regulatory burden of $480,000. It also appeared to have enabled banks to diversify their investor base and reduce their funding risk.
- Covered Bonds PIR [
189KB] - Covered Bonds PIR [
293KB]