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2022-2023-2024-2025
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
PACIFIC BANKING GUARANTEE BILL 2025
EXPLANATORY MEMORANDUM
(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)
Table of Contents
Glossary................................................................................................. iii
General outline and financial impact ...................................................... 1
Pacific Banking Guarantee .......................................... 3
Statement of Compatibility with Human Rights ............ 7
Glossary
This Explanatory Memorandum uses the following abbreviations and acronyms.
Abbreviation Definition
ADI Authorised deposit-taking institution
Bill Pacific Banking Guarantee Bill 2025
Pacific Banking Guarantee Bill 2025
General outline and financial impact
Appropriation for Pacific banking guarantee
Outline
The Bill provides that the Consolidated Revenue Fund is appropriated for the purpose
of meeting any liabilities that the Commonwealth may incur under a Pacific banking
guarantee.
Date of effect
The Bill commences on 1 July 2025.
Financial impact
The Bill is estimated to impact the underlying cash balance over the forward estimates
period as presented in the table below. The financial impact reflects the theoretical
payments projected for a Pacific banking guarantee currently being contemplated. All
figures in this table represent amounts in $m.
2025-2026 2026-27 2027-28 2028-29 2029-30
-1 -1 -1 -1 -1
Human rights implications
The Bill does not raise any human rights issues. See Statement of Compatibility with
Human Rights -- Chapter 2.
Compliance cost impact
Nil.
1
Pacific Banking
Guarantee
Table of Contents:
Outline of chapter .................................................................................. 3
Context of amendments ......................................................................... 3
Summary of new law.............................................................................. 4
Detailed explanation of new law ............................................................ 4
Commencement, application, and transitional provisions ...................... 5
Outline of chapter
1.1 The Bill provides that the Consolidated Revenue Fund is appropriated for the
purpose of meeting any liabilities that the Commonwealth may incur under a
Pacific banking guarantee.
Context of amendments
1.2 The Pacific region has experienced some of the fastest declines in cross-border
banking services globally, reducing the ability to conduct trade and receive aid
financial flows. Remaining connected to the global financial system is one of
the highest priorities for Pacific nations.
1.3 Supporting the Pacific region to maintain access to banking services is a high
priority for the Commonwealth. Banking is a fundamental service, critical for
economic development, prosperity and stability. Australian Authorised
deposit-taking institutions (ADIs) have a significant presence in Pacific
countries and in many places are a crucial part of the countries' financial
system, connecting them to the global economy. The ongoing presence of
Australian banks in the Pacific is also an important enabler of financial
inclusion and the reliable flow of remittances.
1.4 The Commonwealth regularly engages with Australian ADIs regarding their
Pacific operations. The Commonwealth may consider providing support to
Australian ADIs regarding their Pacific operations to ensure that countries in
the region continue to have access to banking services and remain connected to
3
Pacific Banking Guarantee
the global economy. Any guarantees made will cover low risk exposures of the
guaranteed ADI, supporting the ADI to reinvest in their Pacific operations.
1.5 To receive a guarantee, an ADI must have reached a legally binding agreement
with the Commonwealth regarding their continued operations.
Summary of new law
1.6 The Bill provides that the Consolidated Revenue Fund is appropriated for the
purpose of meeting any liabilities that the Commonwealth may incur under a
Pacific banking guarantee entered into with an Australian-headquartered ADI
operating in the Pacific region.
1.7 Any liabilities incurred would be subject to the terms of the relevant Pacific
banking guarantee.
Detailed explanation of new law
1.8 The Bill establishes a special appropriation. Appropriations are the legal
mechanism to support payments by the Commonwealth. A special
appropriation ensures money will be available to be drawn on as and when it is
needed.
[Subclause 5(1) of the Bill]
1.9 The special appropriation is unlimited. This is appropriate as the
Commonwealth has not yet entered into a Pacific banking guarantee and
requires flexibility to negotiate with ADIs on the amount of the guarantee.
1.10 The total maximum amount that could be appropriated will be equal to the sum
of the amounts that the Commonwealth could be required to pay out under all
Pacific banking guarantees made by the Commonwealth. A Pacific banking
guarantee must be approved by the Commonwealth and will be considered on
its merits, including whether the potential cost is outweighed by achievement
of policy outcomes.
1.11 The appropriation is not time-limited as the duration of the guarantees entered
into under the Bill may vary, and the Commonwealth needs to be in a position
to pay its guarantee obligations in a timely manner, should it be required to do
so. However, any Pacific banking guarantee entered into will be limited by the
time specified in the guarantee. It is expected this will be for a 10-year period.
1.12 A Pacific banking guarantee will be:
• a guarantee the Commonwealth grants to an ADI under section 60 of
the Public Governance, Performance and Accountability Act 2013;
• related to the ADI's banking business in the Pacific region; and
4
Pacific Banking Guarantee Bill 2025
• with an ADI that is headquartered in Australia.
[Subclause 5(2) of the Bill]
1.13 For the purposes of the Bill, the 'Pacific region' includes the islands of the
Pacific, Papua New Guinea and Timor-Leste.
[The definition of 'Pacific region' in clause 3 of the Bill]
Commencement, application, and transitional
provisions
1.14 The Bill commences on 1 July 2025. Any Pacific banking guarantee will
commence on or after this date.
5
Statement of
Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Pacific Banking Guarantee Bill 2025
Table of Contents:
Overview ................................................................................................ 7
Human rights implications ...................................................................... 7
Conclusion ............................................................................................. 7
Overview
2.1 The Bill is compatible with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of the Human
Rights (Parliamentary Scrutiny) Act 2011.
2.2 The Bill provides that the Consolidated Revenue Fund is appropriated for the
purpose of meeting any liabilities that the Commonwealth may incur under a
Pacific banking guarantee.
Human rights implications
2.3 This Bill does not engage any of the applicable rights or freedoms.
Conclusion
2.4 This Bill is compatible with human rights as it does not raise any human rights
issues.
7