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Financial Stability Fund – Options-stage Regulation Impact Statement – Treasury

On 2 August 2013, the Treasurer and Minister for Finance and Deregulation announced the establishment of a Financial Stability Fund. The Fund collects money through imposing a levy on Authorised Deposit-Taking Institutions (ADIs), which is to be used to meet the costs of a failure of an ADI. The levy will start on 1 January, 2016 and will be set at 0.05 per cent on deposits of up to $250,000. Under the Financial Claims Scheme (FCS) the Australian Government is required to fund payments to protected depositors (up to a cap of $250,000 per depositor per ADI) in the event that an ADI is placed into liquidation. However, the options-stage Regulation Impact Statement (RIS) prepared by Treasury notes that the Australian Government does not have a dedicated and readily accessible pool of assets that could be used to fund resolution activities. The RIS also notes that ADIs do not currently pay for the right to offer explicitly guaranteed deposit accounts under the FCS. The RIS considered three options: the status quo; establishment of a small financial stability fund; and establishment of a large financial stability fund. Under the new best practice regulation requirements (effective from 8 July 2013) Australian Government departments and agencies, rather than the Office of Best Practice Regulation (OBPR), self assess the adequacy of their options-stage RISs. In particular, agencies must certify that the problem being addressed and the objectives of government action are well articulated; and that a range of feasible options, including regulation, no regulation or light handed regulation and do nothing, have been considered. Before relevant legislation and/or regulation is finalised, Treasury will need to prepare a details-stage RIS that is informed by consultation on this options-stage RIS. The details-stage RIS is formally assessed by the OBPR. A Deputy Secretary of the Treasury certified that this options-stage RIS meets the Government’s best practice regulation requirements.