The Turnbull Government welcomes the Australian Prudential Regulation Authority's (APRA) release today of the discussion paper on a phased approach to licensing new entrants to the banking industry.
As announced at the 2017 Budget, the Government supports the implementation of a phased APRA licensing system to encourage new and innovative providers.
APRA's proposed new approach to licensing authorised deposit-taking institutions (ADIs) seeks to reduce barriers for new entrants while maintaining adequate safeguards.
The proposed changes will also complement the Government’s recent consultation on the removal of the prohibition on the use of the word 'bank' for ADIs with less than $50 million in Tier 1 capital. A more competitive and innovative financial sector means more choice, lower prices and better service for Australian customers.
The financial system is the backbone of the economy and plays an essential role in promoting economic growth. APRA's authorisation process is vital to ensuring new entrants to the banking sector can honour their financial promises and maintain Australia's financial stability and economic wellbeing. It is important, however, that the licensing process does not form an undue impediment to competition and innovation.
APRA is proposing to introduce a phased approach to licensing new entrants to the banking industry, including the introduction of a Restricted ADI licence for certain applicants. This will allow applicants to obtain a licence while still developing the full range of resources and capabilities necessary to meet the prudential framework.
A Restricted ADI licence would subject applicants to specified eligibility and initial criteria, ongoing requirements including not actively conducting a banking business, and a proposed maximum licence duration of two years before transitioning to an unrestricted ADI licence.
The reforms proposed are consistent with those being implemented or planned in other international jurisdictions.