The Australian Prudential Regulation Authority (APRA) has finalised a simpler, faster and more transparent licensing framework for domestic banks, providing greater clarity for applicants while maintaining APRA's robust prudential standards.
APRA is responsible for licensing banks, credit unions and building societies - collectively known as authorised deposit-taking institutions (ADIs).
Its updated licensing framework:
- clarifies expectations by replacing APRA's guidance-based licensing expectations with a clearer, more transparent set of legally effective criteria;
- enables faster and more predictable decisions by simplifying the licensing assessment process and setting clear timeframes for applicants and APRA; and
- delivers greater transparency by clarifying licensing procedures and improving the visibility of APRA's decisions.
While all applicants must demonstrate they meet the minimum licensing criteria, APRA is committed to taking a proportionate approach to licensing assessments. Smaller and less complex applicants will not be expected to demonstrate the same level of sophistication as larger and more complex applicants.
Clearer timeframes provide applicants with greater certainty about the licensing process and increase APRA's accountability for timely decision-making. Applicants will have up to 12 months to meet the minimum criteria. Once APRA determines that an application is substantially complete, it will make a licensing decision within 90 days.
The new framework simplifies APRA's approach by moving from two licensing pathways to a single pathway. As part of this change, APRA will discontinue the Restricted ADI (RADI) licensing pathway, introduced in 2018. Experience with the RADI pathway showed it did not operate as simply or effectively as intended, resulting in limited uptake.
APRA Deputy Chair Therese McCarthy Hockey said the new framework strikes the right balance between supporting competition while upholding robust prudential standards.
"Although APRA's primary mandate is one of financial safety and stability, we also recognise the important role that strong competition plays in boosting innovation, productivity and standards of customer service.
"We expect the new licensing framework to reduce unnecessary burden and resource costs for applicants. The framework also delivers on APRA's commitment as part of the Council of Financial Regulators' Review into Small and Medium-sized Banks to make its bank licensing process more transparent and efficient."
The updated framework was developed over two rounds of consultation with industry and takes effect immediately.
A letter to industry formally responding to submissions on the framework is available at: Finalising the new licensing framework for Authorised Deposit-taking Institutions .
