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‘New bank on the block’ — APRA issues RADI licence

The regulator has granted a restricted ADI licence to a new bank for the Australian market.

The Australian Prudential Regulation Authority (APRA) has granted International Bank of Australia Pty Limited (IBoA) a licence to operate as a restricted authorised deposit-taking institution (RADI).

The bank, and IBOA Group Holdings Pty Limited, will act as a non-operating holding company, under the Banking Act 1959.

IBoA says it "aims to be a new independent digital bank that lets you take control of your financial wellbeing through a simple, intuitive and personalised banking experience".

It intends to be a "global payments bank, licensed in Australia, that will provide banking and payments services to support the increasing global mobility of capital, commerce and people," according to its website.

The RADI - owned by digital banking and payments company Novatti Group Limited - is headed by Guy Carvalho (managing director and CEO) - a former Australia Post head of business & payments services, and a former ANZ business consultant.

Under its restricted banking licence, it can work to become a full bank until 2 November 2024. 

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The restricted licence means it has restrictions on the amount of deposits it can take and has simpler prudential requirements while it builds its resources and capabilities.

The bank said it has "put in place arrangements to protect customers in the event it is required by APRA to discontinue banking business and exits the banking industry".

This includes:

- International Bank of Australia being required by APRA to contact customers to advise how they are impacted, e.g. deposits may be returned or transferred to another bank;
- the Banking Act 1959 provisions for the protection of depositors apply to International Bank of Australia; and
- International Bank of Australia is covered by the Australian Government Financial Claims Scheme (FCS). The FCS applies only to protected accounts. 

IBoA joins a swathe of RADIs, including Alex Bank, Avenue Bank, IN1 Bank and Islamic Bank Australia, among others.

While APRA enables neobanks to test their service before full launch, several RADIs have closed up shop since entering the banking space.

Volt Bank became the latest neo-lender to hand back its licence in recent years – after closing accounts in July.

In 2020, Xinja Bank completed its return of customer deposits and transferred the remaining tail of deposits to National Australia Bank (NAB) after making the shock announcement that it would hand back its banking licence and cease offering banking products.

At the time of the announcement, Xinja had 37,884 customers with 54,357 individual deposits worth more than $252 million.

Following Xinja’s exit, APRA brought in “stronger requirements” for those wishing to be granted a banking licence.

New banking entrants now need to launch both an income-generating asset product and a deposit product before they can secure a full licence, under APRA’s new standards. 

APRA has now said that, before a bank can even gain a restricted ADI (RADI) licence, new entrants will need to present a business plan, as well as a plan to meet the prudential framework for new ADIs within a period of two years, including launch of products, and a contingency plan, which includes at least one option to execute an orderly and solvent exit from banking. 

Ashurst advises IBOA on new banking licence

Global law firm Ashurst had advised International Bank of Australia Pty Limited on its successful application to APRA to become a restricted authorised-deposit taking institution (ADI) and IBOA Group Holdings Pty Limited as a non-operating holding company.

Ashurst Partner Stuart Dullard commented: "We are delighted to have acted for International Bank of Australia on its successful application to become a restricted ADI.”

“We congratulate the team at International Bank of Australia on achieving this milestone,” Mr Dullard stated.

The Ashurst team was led by partner Stuart Dullard and counsel Jason Maletic.

[Related: APRA grants RADI to Australia’s 1st Islamic bank]

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