Financial services marketing and branding

Question: When are authorised deposit-taking institutions (“ADI’s”) permitted to advertise they are a banker which provides banking services but are prohibited from including “banker” or “banking” in their registered corporate, business or trading name or as part of an internet domain name? Answer: When the ADI’s are credit unions and building societies.

This is the confusing position contained in APRA’s updated Guidelines – Implementation of section 66 of the Banking Act 1959 and Banking (consent to assume or use restricted word or expression) No. 1 of 2015.

Sections 66 and 66A of the Banking Act place restrictions on the use of certain terms when used in relation to a financial business.

Only financial businesses that are authorised by APRA to carry on banking business can use terms including ‘bank’, ‘banker’, ‘banking’, ‘building society’, ‘credit union’, ‘credit society’, ‘authorised deposit-taking institution’ and ‘ADI’.

The APRA Guidelines state that these terms are restricted for use to ensure potential customers are not misled into believing that non-APRA-regulated institutions have the same level of capital adequacy, depositor-priority and other prudential protections that apply to ADIs.

Whilst APRA’s position in relation to non-ADI’s including non-APRA regulated deposit-takers such as religious charitable development funds and registered financial corporations is clear, it is difficult to understand how APRA can argue that its depositor protection role can arrive at a result in relation to the use of words which partially distinguishes between ADIs that have the same level of capital adequacy, depositor-priority and other prudential protections.

The 2015 Consent provides:

  • that credit unions and building societies, or a related body corporate of either, may use the expressions ‘banker’ and ‘banking’ in marketing and branding material to describe their banking services, but may not use the term ‘bank’.
  • that credit unions and building societies may not use the expressions the terms ‘banker’ and ‘banking’ as part of a registered corporate, business or trading name, or as part of an internet domain name by a credit union or building society; and
  • that credit unions and building societies with a mutual ownership structure consistent with ASIC RG 147 may use the phrase ‘mutual banking’ only in their marketing and branding material.

In the updated Guidelines APRA has failed to state its position on the ownership of multiple brands by its supervised entities which would make the ownership and alignment of financial businesses more transparent. It is arguable that consumers should be entitled to know when a financial services provider or financial adviser is in fact a related body corporate of another financial institution.

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