APRA’s revised approach to licensing and supervising new banks

The Australian Prudential Regulation Authority (APRA) has finalised its revised approach to licensing and supervising new authorised deposit-taking institutions (ADIs). APRA has issued a final information paper and two guidelines.

The revised approach followed a review of APRA’s ADI licensing regime aimed at incorporating learnings since the launch of the Restricted ADI licensing pathway in 2018. It was designed to encourage more sustainable competition in the banking sector by ensuring new ADIs are better equipped to succeed.

APRA’s final position clarifies the milestones in the progression of a licence application.

Under the finalised approach:

  • restricted ADIs must achieve a limited launch of both an income-generating asset product and a deposit product before being granted an ADI licence;
  • there is increased clarity around capital requirements at different stages for new entrants, aimed at reducing volatility in capital levels and facilitating a transition to the methodology for established ADIs over time; and
  • new entrants are expected to have a more advanced contingency plan to respond to financial stress, including an option to execute the ADI’s orderly and solvent exit from banking business.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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