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Proposed APRA Powers over Non-Bank Lenders

The Australian Treasury has released for consultation, draft legislation which would give the Australian Prudential Regulatory Authority (APRA) prudential regulatory powers in relation to non-bank lenders including marketplace lenders. Non-bank lenders are corporations:

  • whose business activities in Australia include the provision of finance such as:
    • the lending of money;
    • carrying out activities, whether directly or indirectly (such as through a trust), which result in the funding or originating of loans;
    • letting or hire-purchase of goods; or
    • acquiring debts dues to another person, bills of exchange or promissory notes; and
  • with more than $50 million in loan principal amounts outstanding or debts due to it resulting from transactions entered into in the course of providing finance.

Under the proposal APRA would be able to make rules, following consultation with the Australian Securities and Investments Commission (ASIC), in relation to lending finance by non-bank lenders which materially contributes to the risk of financial instability in the Australian financial system. Treasury has pointed out that these powers do not equate to ongoing regulation and supervision by APRA of non-bank lenders. If rules are made they are likely to be in relation to the mortgage and personal lending rather than business lending. However, APRA’s powers are not intended to relate to lending matters, such as responsible lending, which are regulated by ASIC.

Failure to comply with an APRA direction in relation to the rules would be an offence each day that the failure persisted and could result in fines of up to $52,500 per offence for the non-bank lender and $10,500 per offence for an officer which did not take reasonable steps to ensure the non-bank lender complied.

The proposed changes will also result in non-bank lenders having obligations under the Financial Sector (Collection of Data) Act to provide APRA with:

  • information about how the non-bank lender borrows money and the kinds of financial it provides; and
  • a balance sheet.

Comments on the proposals are due 14 August 2017.

Copyright 2020 K & L GatesNational Law Review, Volume VII, Number 201


About this Author

Michelle Chasser, KL Gates, financial services compliance lawyer, disclosure obligations attorney

Ms. Chasser is a corporate and regulatory lawyer with a focus on the superannuation and financial services industries. Ms. Chasser advises clients on a range of issues including compliance with Australian regulatory and licensing requirements, financial services compliance issues and disclosure obligations.

Ms. Chasser's clients include superannuation fund trustees, banks, wholesale and retail fund managers, as well as financial service providers.

Daniel Knight, KL Gates, financial services industry lawyer, retail fund managers attorney
Senior Associate

Mr. Knight is a commercial and regulatory lawyer with a focus on the financial services industry. He advises a range of wholesale and retail fund managers, banks, financial advisers, superannuation fund trustees and other financial services firms.

Mr. Knight concentrates on commercial transactions in the industry and on advising clients about Australian licensing, disclosure, and compliance obligations. He regularly advises international fund managers about offering their products in Australia.

Mr. Knight also has extensive experience advising multinational organisations about bribery, corruption, and anti-money laundering (AML) issues and the governance and compliance measures necessary to prevent these issues from arising.