The Federal Treasury has defended legislation which will enable a key financial services regulator, the Australian Prudential Regulation Authority (APRA), to keep confidential any instructions it may give the major banks or other financial institutions during a time of crisis.
The Treasury dismissed concerns raised with the Senate Economics Legislation Committee that the so-called secrecy provision might see the interests of bank shareholders placed ahead of those of depositors.
Answering questions on notice from the committee, the Treasury made clear that the new legislation was intended to allow APRA to keep its directions to banks confidential in certain circumstances, including where public knowledge of an event might cause a run on the banks.
It said the confidentiality provisions might help create a short period of “breath space” necessary to achieve an orderly resolution.
“Suggestions in the submissions that these provisions will allow APRA to subordinate the interests of depositors in favour of financial system stability in a crisis are not a correct reading of the legislation,” the Treasury answer said.
“The confidentiality provisions in the proposed legislation only relate to APRA’s ability to determine that an APRA direction should be confidential. This would not detract from APRA’s wider statutory objectives to protect depositors under the Banking Act.”