Currency, Exchange and Banking Act

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P.R.O. LAW CONSOLIDATION
Law Status: In-Force
Last Consolidated: 2017-12-22


Whereas for the advancement of the economy of the Kingdom it is judged right and proper that the monetary and banking system of the Kingdom be regulated by law,

Be it decreed by His Royal Majesty, King August Charles II by and with the advice and consent of the Government and Peoples of Gotzborg, in this Chamber of Deputies here assembled, and by the authority of the same, as follows:

Preliminary

Short Title

1. This law may be cited as the Currency, Exchange and Banking Act.

Repealed Law

2. The Banking Regulatory Act (as amended) is hereby repealed.

Commencement

3. This Act shall commence on a date to be fixed by Royal Decree.

Definitions and Interpretation

4. The Royal Chancellor may delegate the various powers, duties and responsibilities of this Act in such manner as he deems fit. Subject to such delegation, in this Act and any related regulation, decree, order or instrument of the Kingdom a reference to a person or organisation shall be taken as a reference to the person or the organisation delegated by the Royal Chancellor for the referred matter; and if no such delegation has been made, the reference shall be taken as a reference to the Vice-Minister for Commerce and Industry.

5. In this Act and any related regulation, decree, order or instrument -

  1. "bank" means an organisation engaged in banking;
  2. "banking" means the activity defined by Article 15 of this Act;
  3. "deposit" means a sum of money placed under the control of a bank without a conferral of ownership;
  4. "the exchange" means the online utility used for holding and transferring units of the currency of the Kingdom, as defined in the "Currency and Exchange" Section of this law;
  5. "foreign" means belonging to, attributable to, registered in, native to, or a citizen of, a nation that is not the Kingdom of Gotzborg;
  6. "organisation" means any corporate entity which is not a natural person.

Currency and Exchange

The Thaler

6. The "Gotzborg Thaler", which may be commonly referred to as the "Thaler" and for which the standard abbreviation shall be "GTh", is the fiat currency of the Kingdom and the measure of value to be used in the Kingdom.

Thalers in Circulation

7. The Royal Bank of Commerce (RBC) is empowered to issue Thalers. The RBC may regulate the volume of Thalers in circulation either by means of its central banking operations (see below) or by direct action in the financial marketplace to buy or sell goods, services or financial instruments.

Notes and Coins

8. It shall be within the power of the Royal Bank of Commerce to issue notes and coins in such denominations of Thalers as the RBC deems fit; however, so long as articles 10 to 14, inclusive, of this law are in force, any such notes and coins shall have ceremonial and symbolic value only and may not be used as legal tender.

9. Article 4 of the Finance Act is hereby repealed; however, the RBC may in its discretion establish such means of minting coins and notes as it deems fit.

The Exchange Utility

10. The Thaler shall be a unit item exchangeable through an online utility, as ordered by Regulation from time to time. The particular online utility in use at any time is referred to herein as "the exchange". Units of value held in a user account on the exchange are the legal tender of the Kingdom.

11. The Royal Chancellor, or his delegate, is empowered to order by Regulation which online utility is to be used as the exchange.

12. For the purpose of holding and disposing of Thalers, a distinct user-operated account on the exchange must be established for every person and organisation in the Kingdom, including but not limited to any agency of the government which is required to handle money and any foreign entity which holds or may conceivably hold Thalers.

The Exchange is Not a Bank

13. Every transaction on the exchange, involving a transfer of Thalers from one account holder to another, is by definition a transaction of "cash". Nothing in this law nor in any regulation or instrument of the Kingdom shall be construed as suggesting that the exchange is a "bank" or an "organisation".

Exchange Transactions to be Integer Amounts

14. A transaction on the exchange shall be of an integer number of Thalers, and it shall not be possible for an account holder to transfer a nunber of Thalers greater than the total in his account.

Banking Generally

Banking Defined

15. For the purposes of this and other laws in the Kingdom, "banking" is a business activity which includes any of the following -

  1. Accepting a deposit from a person or organisation as a steward of that money.
  2. Lending money to a person or organisation.
  3. Trading in negotiable instruments or securities; but the issue by a corporation of a negotiable instrument or security against the assets of that corporation itself does not constitute "trading" under this clause.
  4. Acting as an intermediary in a dealing of any kind which involves movement of money.

Scope of Banking

16. A business activity is classified as "banking" if it meets any one of the criteria of Article 15 above, regardless of any terms, conditions or contingencies attached to the activity; however a non-business private transaction between two natural persons is not classified as "banking".

Unlawful Banking Activity

17. Any business activity that is in breach of this Act is “unlawful banking activity” for the purposes of the following.

18. An indictment brought against a person or organisation alleging unlawful banking activity shall be tried in a criminal court of competent jurisdiction.

19. Unlawful banking activity is a criminal offence punishable in accordance with the law, provided that the following schedule of offences shall apply:

  1. An offence against Article 22 to 26, inclusive, (must have a licence to conduct banking activity) shall carry a fine of not less than GTh50000 and not more than GTh500000.
  2. An offence against Article 33 to 37, inclusive, (lodgement of statutory reserves with the RBC) shall carry a fine of not less than GTh10000 and not more than GTh100000.
  3. An offence against Article 38 (reporting) shall carry a fine of not less than GTh20000 and not more than GTh200000.
  4. An offence against Article 22 (access to records for auditing) shall result in automatic suspension of a banking licence and shall carry a fine of not less than GTh20000 and not more than GTh200000.
  5. An offence against any other provision of this Act shall carry a fine of not less than GTh5000 and not more than GTh50000.

Supervision of Banking

20. The Deputy Minister for Banking shall supervise banking in the Kingdom and monitor the compliance of banks with the provisions of this Act, subject to the following.

21. The Royal Bank of Commerce shall exercise such supervision and due diligence over other banks in the Kingdom as necessary and appropriate for the proper discharge of its central banking role.

Banks

Registration and Licence

22. Only a bank, registered and licensed in accordance with this Act, may conduct banking activity in the Kingdom.

23. Any person or organisation may apply for registration and licensing as a bank under this Article, subject to the following and, in the case of an organisation, subject to compliance with other laws, regulations, orders and instruments of the Kingdom relating to registration of businesses and/or corporations.

24. A bank shall be registered, and a licence issued to that bank for a period of one year, if the applicant person or organisation is considered to be of good character and not a serious risk to the financial stability of the Kingdom. In addition, the applicant person or organisation shall demonstrate their ability to comply with the requirements of this Act generally.

25. The Deputy Minister for Banking shall receive applications, manage the application process and provide advice to applicants, and maintain a register of applications and licences. In executing these duties the Deputy Minister shall liaise with the Royal Bank of Commerce, with the [Royal Security Police Service]] and, as necessary, with the Foreign Office.

26. The Deputy Minister for Banking remains responsible for all matters related to bank licensing as provided by this law and other laws, regulations, orders and instruments of the Kingdom, but has the power of delegation.

Licence Renewal

27. A licensed bank is entitled to annual renewal of its licence provided that it continues to comply with this Act. If the Deputy Minister for Banking is not satisfied as to the compliance of a bank, he may renew the licence on a probationary basis for three months only.

Transfer of a Licence

28. A bank may be sold as a going concern. However, upon such sale and transfer of ownership the Deputy Minister for Banking shall cancel the licence of the bank, issue the bank immediately with a probationary licence for three months, and require the new owner of the bank to make an application similar to an original application for registration based upon which a full licence may be issued or refused.

29. Where a bank is a shareholder-owned organisation, or a subsidiary of a shareholder-owned organisation, section A above applies if effective control of the organisation changes as a result of a transfer of shares. For the purposes of this section, "effective control" shall be evidenced by the report lodged by the bank under Article 38 below.

Application and Licence Fees

30. Fees may be levied for an application, and for recurring licence fees. Such fees shall be determined by the Deputy Minister for Banking with the approval of the Minister of State Home Office.

31. A fee under this Article is payable to the Kingdom before a licence may be issued.

32. No refunds of fees are possible even though an application may be unsuccessful.

Reserve Deposit

33. A bank must lodge with the Royal Bank of Commerce a reserve deposit, equal to a percentage of the total deposits held by that bank.

34. For the purposes of Article 33 above, the applicable percentage shall be determined by the RBC with the approval of the Minister of State Home Office.

35. The RBC must pay interest to a bank for its reserve deposit, which may be paid directly to the bank or credited to the bank's reserve deposit, and the rate of which shall be determined by the Royal Bank of Commerce with the approval of the Minister of State Home Office.

36. The reserve deposit of a bank is forfeited to the RBC if the bank in question has its licence cancelled or not renewed.

Additional Reserves

37. In addition to the reserve deposit as provided by Articles 33 to 26, inclusive, the RBC may require a bank to hold a further proportion of its assets in the form of bonds or other securities issued by or guaranteed by the RBC; but the total reserve holding requirement for a bank inclusive of the reserve deposit and holdings under this Article shall not exceed 50% of the total deposits held by that bank.

Compliance Requirements

38. For the purpose of proving compliance with this Act, a bank must provide to the Deputy Minister for Banking a report not less than once every two months certified by the chief operating officer of the bank containing the following information -

  1. Total current value of deposits held.
  2. Total current value of issued securities and bonds and, if the bank is a shareholder-owned corporation, the shareholder register.
  3. Total current value of outstanding loans and other credit issued.
  4. Details of each foreign currency transaction made.
  5. Details of any financial dealings by the bank not described by the above.
  6. The balance sheet of the bank; but where the bank is a subsidiary of another organisation, this reporting obligation refers only to the subsidiary and not to the parent organisation.
  7. The names and micronationality of each employee and official of the bank.

Audit

39. If the Deputy Minister for Banking is not satisfied that a report, lodged under article 38 above, is a true and accurate representation of the operations of that bank, he may order an audit of the bank. It is a condition of holding a bank licence that a bank must permit and assist full access to its records for the Deputy Minister for Banking or his delegate to conduct an audit.

Banking Operations Generally

40. In applying for and accepting a banking licence, a bank undertakes to offer banking services in the Kingdom. It is a breach of this article for a bank to hold a licence but not operate.

41. Dealings between a bank and its clients shall be confidential.

42. A bank must publish openly and clearly its terms and conditions of and for any service or product it offers.

Legitimate Banking Practices

43. A bank is considered to be operating lawfully if it complies with this Act and with other laws, regulations, orders, decrees and instruments of the Kingdom, and does not breach section B below.

44. A bank must not -

  1. make an offer to any client which it is not able to meet from its resources;
  2. subject a client to unjust treatment in any transaction between the bank and the client;
  3. misrepresent any party when acting as an intermediary in a financial transaction;
  4. apply a usurious rate of interest or fee, or a combination thereof, to any loan or line of credit;
  5. enter into a contract with a client where that client does not have the resources to meet his obligations under the contract;
  6. dispose of its assets in a manner which may damage its ability to meet its liabilities;
  7. misrepresent its position in any report to or response to any query from any person or agency lawfully competent to seek such;
  8. fail to fully and properly acquaint any prospective buyer with the requirements of licence transfer and banking operations under this Act.

Bank Failure

45. A bank is considered to have failed if it is unable to meet a due payment of any kind and has no recourse to satisfy that payment. However, it is the duty of the Royal Bank of Commerce to assist a bank in such a situation by such means as are at its disposal.

46. In the case of a bank which ceases business with outstanding liabilities, the RBC shall take possession of the assets of that bank and satisfy the liabilities whether or not the seized assets are sufficient.

Cancellation of a Licence

The Deputy Minister for banking may cancel the licence of a bank by refusal to renew, or upon a change of ownership of the bank as provided by Article 28 to Article 29, inclusive, or by closing down a bank which is operating unlawfully; but in the latter case, a bank may only be closed down by an order of a competent court.

The Royal Bank of Commerce

Central Bank

47. The Royal Bank of Commerce , as established, shall provide central banking services to the government and the financial sector of the Kingdom.

Duties of the RBC

48. The RBC is the banker to the government of the Kingdom, and shall provide the other services and functions stipulated by this Act. This includes but is not limited to -

  1. receiving and holding reserve deposits and additional reserves from banks;
  2. operating deposit and loan accounts for the treasury of the Kingdom and for other agencies of the government;
  3. determining interest rates for reserve and other deposits and for loans to banks and to the government of the Kingdom;
  4. operating in the financial marketplace to buy and sell bonds and other negotiable instruments for the purpose of regulating the volume of money in the economy of the Kingdom;
  5. providing advice and assistance to the Deputy Minister for Banking for any duty or power exercisable by that minister under this law; and,
  6. any other duty or power assigned to the RBC by this law or any other regulation, order or instrument of the Kingdom.

RBC is not a Commercial Bank

49. The RBC shall not offer deposit or credit services to non-government and non-bank persons or organisations; however this shall not prevent the RBC from buying or selling bonds or other instruments, including its own Bonds or instruments, nor from dealing with persons or organisations outside the Kingdom which fulfill some or all of the definitions of Article 15.

Governor of the RBC

50. The RBC shall be managed by a Governor who shall be appointed by the Royal Chancellor for a period of not less than six months, and whose tenure may be renewed any number of times.

Management of the RBC

51. The Governor of the RBC may manage the RBC in such manner as he deems fit, subject to this law and to regulations, orders or rules made for the operation of the RBC.

52. The RBC shall make a public report not less than once every six months, to summarize the operations of the RBC during that period and the state of the economy of the Kingdom with particular regard to banking and monetary policy.

Notes

Chamber of Deputies Hansard Record
Introduction Date: 2013-02-19
Tabled By: His Royal Majesty
Vote Outcome: In Favour: 0; Against: 0
Royal Assent Date: 2013-02-19 (Article 28)
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