The Australian Prudential Regulation Authority (APRA) has written to applicants for new banking or insurance and superannuation licences to advise that it is placing a six-month moratorium on new licences. (However, this can be waived “in the rare case that the granting of a licence is necessary for APRA to carry out its mandate”.)
In the letter, APRA’s general manager for regulatory affairs and licensing, Melisande Waterford, told applicants that this was due to a “fundamental change in the economic and social environment in Australia and globally”.
Ms Waterford wrote: “Financial institutions, particularly those that take customer deposits, look after superannuation funds or issue insurance, occupy a unique position of trust. The financial safety of these institutions is key to the financial stability and wellbeing of the community and, as a result, these institutions are subject to higher standards than many sectors of the economy. This includes higher entry standards.
“The process of granting an APRA licence is intended to help ensure that a new entrant will be able to honour the financial promises it makes under all reasonable circumstances.
“In licensing new entrants to the prudentially regulated segments of the financial system, APRA aims to achieve an appropriate balance between financial safety and other important considerations to the community – efficiency, competition, contestability and competitive neutrality. In doing this, APRA is also asked to promote financial system stability in Australia.
“Experience has shown that it is challenging for new entrants to succeed even under normal economic conditions, which is why APRA does not consider it prudent to license APRA-regulated entities at this time,” she said.
However, the GM added that APRA will “keep its approach under review” as the operating environment stabilises, and advised current applicants when the granting of licences will restart.
APRA said it expects that this temporary hold could last at least six months and delay APRA licences by at least this time frame.
The regulator said it will continue to assess current licence applications so the delay on launching when the hold is lifted is minimised.
A banking licence may be granted for institutions that wish to operate across a broad range of segments of the market and offer a wide range of banking services. During the licensing assessment, the institution would be required to demonstrate it meets all aspects of the prudential framework for the full range of services it will be offering.
An institution that has been granted a licence under the Banking Act by APRA is referred to as an authorised deposit-taking institution.
[Related: New player eyes ADI space]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.