On Wednesday, APRA released its finalised approach to licensing and supervising new authorised deposit-taking institutions (ADIs), which it said comprised “stronger requirements for being granted a banking licence and closer supervision of new entrants as they seek to establish themselves”.
The news comes following the launch of a number of start-ups in the banking space recently, including Alex, headed by former Suncorp executive Simon Beitz, and 86 400, which was purchased by NAB in April.
The prudential regulator said the changes, based on a review of the bank licensing regime since APRA launched its restricted ADI system for new banks, would “encourage more sustainable competition in the banking sector by ensuring new ADIs are better equipped to succeed”.
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 a full ADI licence.
They must also have an “advanced contingency plan to respond to financial stress, including an option to execute the ADI’s orderly and solvent exit from banking business” if the situation warrants it, the prudential regulator says.
In addition, APRA has clarified capital requirements for start-up banks at different stages of the restricted licensing process, in order to facilitate an easier transition to a full licence and reduce capital volatility for new ADIs.
APRA said the new approach would come into effect immediately.
