Foreign banks could fall under bank levy, warns APRA

As announced in the federal budget, a 6-basis-point levy will now apply to the five largest banks (with assessed liabilities of $100 billion or more), with the first payment due on 21 March 2018.

According to the Treasury, the levy would bring in $6.2 billion over the budget.

Following on from a public consultation on the draft reporting standards for the levy (which will affect ANZ, Commonwealth Bank of Australia, NAB, Macquarie and Westpac), the ATO and APRA have released a joint response to the submissions.

APRA reportedly received six submissions to the consultation; however, five of them (presumably from the five authorised deposit-taking institutions [ADIs] affected) have not been released as they are “confidential”.

The remaining submission, from the Australian Financial Markets Association (AFMA), which represents the interests of more than 100 participants in the wholesale banking and financial market, has been released.

Echoing concerns raised by the banks during the Senate Economics Legislation Committee hearing into the major bank levy, the association highlighted the “short consultation period”; the wish for the levy to be applied only to Australian operations of banks (and not their foreign bank branches); assurances that should any global liabilities reported by a bank to APRA under another reporting standard were to exceed the levy threshold, they would not “inadvertently” come under the scope for the levy; and clarity over the differences between the terms “licensed ADI” and “authorised ADI”.

While the response does not address all of these concerns, the reporting standard clarifies that "licensed ADI" aligns with the accounting concept of a "parent".

Notably, the submission reveals that the standard has been amended to require ADIs to report interbank loans from ADIs and foreign banks as one item.

Further, it states that the primary legislation applies to foreign ADIs. However, the liabilities that are taken into account in determining whether the major bank levy applies to a foreign ADI are only those relating to their Australian branch operations.

While there are currently no foreign banks whose Australian branch liabilities exceed the $100 billion major bank levy threshold, the two bodies have clarified that should the liabilities relating to the Australian branch operations of a foreign ADI exceed that threshold in the future, the foreign banks will be liable to pay the levy. 

Other clarifications from the submission include:

The final reporting standard, ARS 760.0, has now been released by the ATO, and will apply for the quarter ending 30 September 2017 and subsequent quarters.

[Related: RBA downplays bank levy impact]