Treasury is consulting on draft Treasury Laws Amendment (Non-ADI Lender Rules) Bill 2017 which will give APRA new powers in respect of lending finance by entities that are not authorised deposit-taking institutions (non-ADI lenders).

If passed, the draft Bill will:

• amend the Banking Act 1959 to provide APRA with a power to make rules concerning the lending activities of non-ADI lenders for the purpose of addressing financial stability risks (‘non-ADI lender rules’) and to issue a direction to a non-ADI lender should the entity fail to comply with a non-ADI lender rule (including a direction to stop lending). The amendments include penalties for non-ADI lenders that fail to comply with a direction by APRA; and
• amend the Financial Sector (Collection of Data) Act 2001 to allow APRA to collect data from non-ADI lenders for the purposes of monitoring their activities and determining when to use its new powers.

What does it apply to?

“Lending finance” means any of the following:
(a) the lending of money, with or without security;
(b) the carrying out of activities, whether directly or indirectly, that result in the funding or originating of loans or other financing.

Who does it apply to?

A non-ADI lender is a registrable corporation (within the meaning of the Financial Sector (Collection of Data) Act 2001) which is not an authorised deposit-taking institution (ADI) under the Banking Act.

A corporation is a registrable corporation if the corporation is a foreign corporation, a trading corporation formed within the limits of Australia or a financial corporation so formed and the business activities in Australia of the corporation include  the provision of finance.

It does not include life insurers, private health insurers, benefit funds or companies with less than $50M debts due to it resulting from transactions entered into in the course of the provision of finance and if the sum of the values of the principal amounts outstanding on loans or other financing, as entered into in a financial year, does not exceed $50M.

You can see the current list of registrable financial corporations here.

APRA’s powers and penalties

APRA will not prudentially regulate and supervise non-ADI lenders as it does ADIs.

The kinds of direction that the body corporate may be given by APRA are directions to do any one or more of the following:
(a) to comply with the whole or a part of a non-ADI lender rule;
(b) to refrain from the lending of money, with or without security;
(c) to refrain from the carrying out of activities, whether directly or indirectly, that result in the funding or originating of loans or other financing.

An officer of a non-ADI lender commits an offence if:
(a) the officer fails to take reasonable steps to ensure that the non-ADI lender complies with a direction given to it; and
(b) the officer’s duties include ensuring that the non-ADI lender complies with the direction.

The penalty for non-compliance with a direction is $10,500 a day for individuals and $52,500 a day for companies.

Reporting

APRA collects data from registrable corporation under the Financial Sector (Collection of Data) Act 2001.

Reporting requirements for registrable corporations are given legal effect through Reporting Standards under the Act.

Information on the current reporting framework is set out here.