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Banking and financial services contract – frequently asked questions

Read supporting information on this contract.

Victorian Government banking arrangements

Who manages Victorian Government banking arrangements?

Victorian Government banking arrangements are managed by the Department of Treasury and Finance. It manages the:

What is the Central Banking System?

The Central Banking SystemExternal Link enables the Department of Treasury and Finance to centralise surplus funds held by departments and agencies in bank accounts across the Victorian Government. Centralising funds in the Central Banking System improves the efficiency of the State’s cashflow management task and reduces higher cost long-term borrowings. Reducing long-term borrowings delivers net interest savings to the budget, provides support to the State’s credit rating, and the capacity to fund government services.

Funds held by department and agencies in Central Banking System are held in bank accounts provided by state purchase contract panel banks. The terms and conditions and operational arrangements of accounts are governed by the state purchase contract and funds held in bank accounts can continue to be immediately accessed.

Banking and financial services state purchase contract

When does the previous state purchase contract expire?

The previous state purchase contract (with Westpac as a sole supplier) expired on 30 September 2021. A transition period applies from 1 October 2021 to 31 March 2022.

Westpac will continue to provide services and/or products under the state purchase contract during the transition period.

When will the new banking state purchase contract begin?

The new banking state purchase contract commenced on 1 October 2021 with a transition-in period of 6 months ending 31 March 2022.

What is the contract term?

The initial contract term is 5 years. The State has the option to extend the state purchase contract for 2 further 2-year terms.

Which banks are part of the new Banking state purchase contract?

A 3-bank panel has been appointed:

  • Commonwealth Bank of Australia
  • National Australia Bank
  • Westpac

This followed an open tender process where large domestic and global banks, along with smaller and more specialised banks and service providers, including community banks, were invited to participate.

What are the services (modules) in the new Banking state purchase contract?

Agencies can choose to use one bank or a combination of panel banks for different services.

Services and associated pricing provided by each of the banks are not identical.

The Banking state purchase contract comprises 4 modules:

  • Module 1 – Core transaction banking
  • Module 2 – Merchant services/acquiring
  • Module 3 – Purchasing/procurement cards
  • Module 4 – Omni payment channels

How does the panel arrangement work?

The state purchase contract is a non-exclusive panel arrangement. Agencies can procure services from any of the panel banks, noting that the service offerings are not identical.

Agencies may:

  • obtain services from more than one bank
  • select services from a module (that is, an Agency does not have to use all the services within a module).

Who must use the panel banks?

The following Agencies must obtain banking, payment and collections services from one of the panel banks:

Local councils are not required to use the contract.

Is there flexibility to choose suppliers?

Agencies can obtain financial services with any of the 3 panel banks for all or part of their services (that is, any module). Agencies can also choose more than one panel bank for different products and services within a module.

When do Agencies need to transition bank accounts and other products?

Agencies must transition:

  • all bank accounts to the new Banking state purchase contract by 31 March 2022
  • all other products and services offered under the new Banking state purchase contract by 1 October 2022.

See Banking financial services contract - transition requirements.

What if an Agency already banks with a panel bank?

If an Agency currently banks with one of the panel banks, it has the option to stay with that bank. To do this, the Agency needs to complete a new purchase order contract.

If an Agency wants to change banks, it must complete a new purchase order contract with the new panel bank.

What if an Agency currently does not bank with a panel bank?

All in-scope Agencies must move its banking arrangements (for products or services available under the new state purchase contract) to one of the 3 panel banks, if it:

  • do not bank with any of the panel banks
  • obtain financial services from a non-bank financial service provider.

Can Agencies continue to use local community banks?

All government Agencies have been mandated to use the new Banking state purchase contract.

Agencies who have raised funds from their local community, such as:

  • donations
  • bequests
  • foundations

can hold these funds with a bank of their choice. This must be in line with the portfolio department's financial management policies.

All other funds must be held with an approved panel bank supplier under the State Purchase Contract.

How many local branches are available to regional communities across Victoria?

The new contract provides access to over 626 regional branches and over 815 metro branches (across all 3 banks and Australia Post).

How do Agencies access banking services in regions where there is less access to panel banks’ branches?

The new panel arrangement provides multiple options to cover regional Agencies’ banking services needs, including easy to use online banking platforms and the option to bank with the local post office.

How do Agencies access information on the new Banking state purchase contract?

Agencies will need to register to gain access to confidential information on the new state purchase contract under the 'how buyers join this contract' section. The section details:

  • how to access the contract terms and conditions
  • use of the Bank Selector Tool.

Agencies will need to complete confidentiality requirements (noting the high commercial sensitivity of this information).

Will a bank account in the new Banking state purchase contract be part of the State’s Central Banking System?

Bank accounts set upthrough the state purchase contract will become part of the Central Banking System.

Do Agencies need to confirm that it is eligible to be a party to the new Banking state purchase contract?

If an Agency is unsure if it is eligible, it should contact the Banking services team to confirm if it will be accepted into the new state purchase contract.

A request should be issued by the Agency to panel banks. The panel banks will provide proposals and work with the Agency to complete the purchase order contract and other required documentation.

What happens to bank accounts outside of the state purchase contract?

All bank accounts not operated with a panel bank must be closed and new bank accounts established with a panel bank by 31 March 2022.

More complex banking arrangements such as receipt processing must be transitioned by 30 September 2022.

If an Agency believes that it will not be able to transition its bank accounts or other services by the compliance dates, it can request a longer transition period. Requests for a longer transition period must be approved by the Banking services team before 31 December 2021. Agencies are advised to allow sufficient time for this process.

Contact the Banking services team to discuss requests for a longer transition period.

What if an Agency can not transition in time?

Agencies can apply for an extension by completing a transition plan pro-forma.

To request a transition plan pro-forma email: working.capital@dtf.vic.gov.au.

See Banking financial services contract - transition requirements.

What do Agencies with stand-alone contracts with Australia Post do?

Australia Post individual contracts can remain in place until they expire. Once expired, Agencies must procure these services from a state purchase contract panel bank.

How do Agencies choose a banking services supplier?

  • Review the panel banks.
  • If an Agency is currently using a panel bank, it can stay with that bank.
  • A panel bank must provide the services the Agency is seeking. The panel banks do not have a uniform service offering.
  • Differentiation can be made on the best value for money, best price or best functionality.
  • The Agency should prepare a business case for transition from one panel bank to another panel bank, considering both the explicit and implicit costs of transition.

Where do I find the purchase order contract?

Existing arrangements with state purchase contract banks

Contact the current bank and request for a short form purchase order contract to enable transition of the current services to the new state purchase contract.

New arrangements

The purchase order contract is available under the contract schedules (master service agreement) for each bank. This is located in the confidential section, see 'How buyers join this contract'.

Central Banking System

Do Agencies have to participate in the Central Banking System?

All bank accounts held with a state purchase contract panel bank are accounts within the Central Banking System.

Agencies that are subject to the Standing DirectionsExternal Link are required to hold all bank accounts with a state purchase contract panel bank. This includes:

  • general government agencies
  • public non-financial corporations
  • public financial corporations.

What are Eligible Financial Assets?

The Standing Directions define ‘Eligible Financial Asset’, in respect of an Agency as:

  1. any asset of that Agency that would be recognised in accordance with Australian Accounting Standards as any of the following:
    1. cash and deposits
    2. investment, loan and placement
    3. any financial asset equivalent to any of those referred to in paragraphs (i) and (ii) above
  2. any asset or class of assets specified in writing by the Assistant Treasurer but does not include any Excluded Asset.

‘Excluded Asset’ means any:

  1. share or equivalent equity interest in another entity held by an Agency, or
  2. loan provided by an Agency to another entity.

An Agency is not required to liquidate an Eligible Financial Asset where the Agency has existing approval from the Treasurer or the Assistant Treasurer to hold that Eligible Financial Asset in a specified form.

What funds are excluded from the Central Banking System?

The Standing Directions specify that the following funds are exempt from the Central Banking System:

  • notes and coins
  • third-party funds
  • non-government source funds, other than own source revenue
  • any part of the Agency’s Long-Term Investment Funds which the Agency originally received from money appropriated for tangible asset investment, with approval to invest in financial assets pending payment for the tangible asset
  • Financial Assets in respect of which an exemption has been provided under Standing Direction 1.5(b); and the Treasurer may also provide specific exemptions to Agencies where appropriate.

Some Agencies are exempt from the Standing Directions, however, under Standing Direction 2.3.5, Portfolio Departments must establish appropriate financial management requirements for these entities.

Can an Agency access funds from its Central Banking System account at any time?

Yes, funds remain in state purchase contract bank account, which will operate as a standard transactional bank account.

What is an Agency credit risk exposure when holding funds in a Central Banking System account?

Credit risk exposure remains with the panel bank, as it does with a standard bank account.

In the unlikely event that the panel bank defaults, it is reasonable to expect that the State would provide financial assistance, however an explicit guarantee from the State does not exist.

This statement holds true for all Agencies that are part of the off-set arrangement that the State has in place with all state purchase contract panel banks.

How does an Agency obtain visibility of its Central Banking System account?

Through online electronic banking platforms provided by the panel banks. Monthly account statements are also provided to the Agency.

If an Agency has multiple accounts as part of its bank account structure – what does it do?

The balances of all bank accounts need to be held within the Central Banking System, unless specifically exempted.

Agencies can have more than one account within the Central Banking System and with different providers to maximise efficiency of cash management systems and functions.

How are Department Trust Funds that have been appropriated for specific purpose managed under the new state purchase contracts?

Trust accounts are Department accounts that have been established in the Central Banking System.

All Department accounts will be transitioned to the new state purchase contract under an umbrella purchase order contract approved by the Assistant Treasurer.

No further action is required for Departments.

Agencies that have an overdraft facility available for its current account - what changes does it need to make?

Agencies cannot have an overdraft unless specifically approved by the Treasurer.

Agencies need to ensure that their Central Bank System account does not go into overdraft. If an account goes into overdraft temporarily, an overdraft rate will be applied to the account until it returns to surplus.

Agencies will need to:

Agencies that have an existing set off facility available for its bank accounts - what changes does it need to make?

Contact the Banking services team and the bank.

Different banks have different approaches to this issue. Some cannot accommodate a ‘set-off’ within a set-off, that is the Central Banking System.

Are there any implications to cash flow forecasting obligations?

Under the Standing Directions portfolio departments must maintain a rolling 12-month cash-flow forecast. The Department of Treasury and Finance and the portfolio department can request an Agency to submit an individual cash flow forecast.

The Department of Treasury and Finance may request Public Non-financial Corporations and Public Financial Corporations with large balances in Central Banking System accounts to submit a cashflow forecast.

Is interest paid on Central Banking System accounts? What is the interest rate?

The interest rate paid on funds held in a Central Banking System bank account is linked to the Reserve Bank of Australia cash rate. The Department of Treasury and Finance reviews this interest rate margin on a monthly basis.

Details of interest payments are provided in monthly bank statements. If an account is in overdraft, an overdraft rate will be applied until it returns to surplus.

Will Agencies be charged any additional fees on their Central Banking System account?

There are no additional fees applied to accounts in the Central Banking System.

Can an Agency have a specific account for third party funds?

Separate Central Banking System accounts can be opened to hold special purpose funds which need to be identified separately from other funds. To assist Department of Treasury and Finance reporting requirements, ensure they are identified as such within the account name.

Do interest payments within the Central Banking System need to be reported?

From a tax reporting perspective, interest payments apportioned to Central Banking System accounts need to be accounted for as interest paid by the Department of Treasury and Finance (not the bank).

From a reporting perspective, interest on the whole arrangement is paid by the Department of Treasury and Finance, and the banks apportion a credit amount to the accounts within the Central Banking System (proceeds transfer as per instructions from Department of Treasury and Finance account).

Once the account is added to the Central Banking System, any interest earned on the account is a transfer of funds from the Department of Treasury and Finance to an Agency bank account, rather than a payment of interest from the bank to an Agency.

Help and support

For help and support, contact the Banking service team.

Reviewed 17 May 2022

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