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.
By Jim Bulling and Felix Charlesworth
On 15 August 2017, the Australian Prudential Regulating Authority (APRA) published a discussion paper entitled ‘Licensing: A phased approach to authorising new entrants to the banking industry‘. The Discussion Paper proposes changes to APRA’s licensing framework with the introduction of a new restricted ADI licences regime.
This phased approach enables entrants who require time to build resources and capabilities, such as fintech start-ups, to conduct banking related business by reducing conventional barriers to entry such as the requirement to hold at least $50 million in start-up capital.
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.
Has the age of the digital bank arrived in the UK? Following the authorisation of Atom Bank last year, 3 additional digital banks have been issued with banking licences by the UK Prudential Regulation Authority (PRA) since May 2016.
These new licensees are the result of the PRA’s focus in recent years on lowering the barriers to entry for new banks and promote competition in the UK. As part of this focus, in 2013, PRA lowered the initial minimum capital requirements for Small Specialist Bank applicants to €1 million or £1 million (whichever is higher), plus a capital planning buffer (CPB). PRA and the Financial Conduct Authority (FCA) also launched a New Bank Start-up Unit in January 2016 to assist applicants with the authorisation process. Read More