banking law report

Law of Financial Institutions and Securities


Semester 1, 2012


Answer Questions 1 and 2

Question 1
You were recently appointed to a middle-management role in an Australian Bank. Recently, you read an article in the business news stating that the Reserve Bank of Australia had announced a decision to investigate Bank funding costs (refer to the attached article, ‘RBA investigates Bank Funding Costs’ ( Financial Review, 27 /02/12).
The RBA will release its report on 15 March 2012 as part of its quarterly bulletin which will be available on its website:
One of your staff expresses concerns about the impact this investigation will have on banking in Australia, and makes the following comments to you:
‘ The RBA is just bank bashing. I don’t see how it can have any jurisdiction to do this as it is only in charge of monetary policy- whatever that is- and I can’t see what bank interest charges have to do with it. I could understand it if it was APRA doing this, but it is not ’.
Write a report in which you:
(1) Explain the reasons for the RBA investigation, describing the findings of the report ( once it is published on 15 March 2012) and the implications for banks in Australia, and

(2) Analyse whether the staff member’s comments are correct, explaining the role and jurisdiction of the RBA, making comparisons with APRA.
To answer this question, you must at least refer to the article and the RBA’s website.
( Word length: maximum of 1,000 words)
( 12 marks)

Question 2
Amanda and John are Information Technology specialists who have recently formed a new company, I.T Consulting Pty Ltd (‘ITC’), to provide consulting services. Amanda and John are the sole directors and shareholders of ITC which will operate in Melbourne, and employ one administrator.

Amanda and John have decided that both they and their company should conduct all their banking with North Pacific Bank Ltd (‘North Pacific’).

To do that, they meet with the branch manager of North Pacific and complete various forms that they do not read.

A number of these forms relate to opening their own separate, personal accounts (consisting of credit card, debit card and savings accounts), while others relate to opening a current account for ITC.

When John enquires about the terms of their banking services, the branch manager, Yvonne, informs him that these will be mailed ‘at some stage’. ( In fact, they never are, in spite of numerous requests over the next few weeks. Nor are they given any other documents).

Once the meeting is over, Amanda and John have the following conversation:
Amanda: ‘I’m glad we do not need to be concerned about our savings as we can always trust our bank. Now that we’re customers, the bank is our trustee in relation to the money we own in our accounts ’.
John: ‘ I’m not sure about that, but I did hear the Australian Government does guarantee money held in deposit accounts’
Amanda: ‘ I think that is true. At least with the accounts we and ITC have, we’ll all enjoy rights under Industry Codes and legislation, though I’m not sure what they’re about’.


(i) By reference to the facts, explain North Pacific’s legal obligations in relation to its customers, and whether it has complied with those obligations.

(ii) Explain whether you agree with the comments made by Amanda in John in their conversation with one another.

For both parts of this question, you need to refer to relevant authorities, as well as highlight and define key terms appearing in the facts.

( 13 marks)

( Word length: maximum of 1,500 words)

( Continued)
Important Information

A. This assignment should be:-

• approximately 2,500 words in length
• typewritten on A4 paper

B. Professional presentation of the assignment is required, for which marks will be allotted. Your assignment may be presented as a report if you choose, in which case use headings and sub-headings, though this is not essential. It should be duly referenced.

C. The assignment counts for 25% of the total assessment in this subject.

D. The due date for the assignment is end of WEEK 10 ( 5 pm, Friday 11 May, 2012)

Students must submit an electronic copy of their assignment through WEBCT/ Blackboard
by the due date. This allows for official receipt of the assignment. Students must
also provide a hardcopy to their lecturer in their lecture or tutorial in Week 11.

E. Ensure that you refer to authorities (cases and legislation) accurately:

• Acknowledgment of sources, including textbooks and articles must be made by way of footnotes.
• Do not quote from source material without using quotation marks.
• Even where you do not quote directly from a source but use an idea from that source, you should acknowledge that source even where you express it in your own words.
• Include a bibliography at the end of the assignment

F. Recommended Reading includes:

• Internet references given in lectures, including the legal search engine

• Butterworths online publications (available through VU’s intranet/ library site)

• Your textbook and other banking law texts.

G. How you are assessed: Marking Criteria

Content: Has the student identified and articulated the relevant content/legal
issues/information in the answer? Has the student “researched” the topic, explored the relevant cases (where relevant)?

Structure: Has the material/content been presented in a cogent, logical, and thorough manner?

Relevance and Completeness: Has the student answered the question? Have all the elements of the question been addressed?

Analysis: Has the student “critically analysed” and “discussed” the content?

Understanding: Has the student demonstrated an understanding of the content and the issues arising from an analysis of that content?

Presentation: Has the answer been presented (e.g written) in a clear and concise manner?

Conclusion: Has the student reached a conclusion and used appropriate evidence to justify this conclusion?

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