February 25, 2021

Volume XI, Number 56

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Restricted ADI Licensing Scheme Commences in Australia

Last Friday, the Australian Prudential Regulation Authority (APRA) finalised its new Restricted Authorised Deposit-taking Institution (ADI) licensing process in Australia that came into effect immediately.  New entrants to the banking industry will be able to apply for a Restricted ADI licence, which will have a lower barrier to entry than a full ADI licence, to assist their transition into the industry over a two-year period.  This is a significant change as only one ADI licence has been granted to a non existing bank-affiliated entity in the past decade, which has rendered Australia’s start-up banking sector effectively non-existent.

Entities holding a Restricted ADI licence will be able to conduct limited low-risk banking business, while seeking investment and developing their resources and capabilities in order to comply with the prudential framework, for a period of two years.  Restricted ADIs will be subject to an aggregate deposit limit of $2 million and must disclose to all its customers that they are operating on a restricted licence.

APRA will engage with and provide assistance to such entities during this period.  If APRA forms the view that the entity will not be able to comply with the prudential framework after the two year period, it will require the entity to cease its banking business and exit the industry.

In order to maximise the chances of successfully obtaining a Restricted ADI licence, applicants should:

  • engage with APRA at an early stage to discuss relevant requirements;
  • ensure compliance with all application requirements, including capital requirements (approximately $4 million at a minimum) and having proper policies in place; and
  • have a credible strategy which details the applicant’s plan to meet the prudential framework within the two year period.

APRA has stated that it may take 3 to 18 months to assess an application.  To date, only volt bank limited has been granted a Restricted ADI licence.  You can view APRA’s guidance here

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Copyright 2020 K & L GatesNational Law Review, Volume VIII, Number 128
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TRENDING LEGAL ANALYSIS

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About this Author

Jim Bulling, KL Gates, financial services lawyer, funds management attorney
Partner

Mr. Bulling's practise focuses on banking and financial services and he acts for a range of entities in the financial services and funds management industry. His clients include Australian and international investment managers, banks, trustees of superannuation funds, wholesale and retail investment trusts, funds management companies and financial planning groups.

His main areas of focus include banking and financial product disclosure issues, financial services compliance issues, financial product distribution issues and superannuation and...

61-3-9640-4338
Edwin Tan, KL Gates, investment fund attorney
Lawyer

Mr. Tan is a commercial and regulatory lawyer with a focus on the financial services industry. He advises on a range of Australian regulatory and compliance issues relevant to FinTechs, fund managers, financial advisers and other financial services entities.

Mr. Tan also provides advice on governance and compliance measures targeted at the prevention of bribery, corruption and anti-money laundering.

61 3 9205 2176
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