Australian Bank Licensing

In recent years, the Australian Prudential Regulatory Authority (APRA) has significantly updated the regulations for businesses aiming to enter the Australian banking sector. If your organization is planning to establish a banking operation in Australia, having a specialized adviser to guide you through the process is crucial for your success.

Lemoigne, with its top-tier bank licensing expertise, can assist you in strategically positioning your approach, navigating the necessary processes, and applying for the appropriate licence for your organization.

Continue reading to learn about the various licence types, processes, and answers to frequently asked questions.

Banking licence types – ADI and RADI

There are two banking licences available in Australia: an authorised deposit-taking institution and a restricted authorised deposit-taking institution. These licences also apply to neobanks.

ADI Licences

An authorised deposit-taking institution (ADI) licence is permission granted by APRA for an organisation to conduct banking business in Australia and is not limited by time.

  • $110,000 AUD application fee

  • An ADI, excluding those designated as Restricted ADIs, that has been recently authorized with an ADI licence, is now under a modified supervisory regime.

    An ADI licence is the permission given by APRA under section 9 of the Banking Act, allowing a corporate entity to operate a banking business in Australia. This licence can be granted with or without conditions and is not restricted by duration.business in Australia, with or without conditions, that is not limited by time.

  • Everything starts with a concept. Perhaps you're thinking about starting a business, transforming a hobby into something bigger, or maybe you have a creative project that you want to introduce to the world.

  • Fully developed – IT systems comply with applicable prudential standards and consider the guidelines of Prudential Practice Guides (PPGs) and information papers.

  • Fully developed – meets requirements of APRA's business continuity management standard.

  • Finalised Internal Capital Adequacy Process (ICAAP). Meets requirements of all capital related prudential standards.

  • Meets requirements of APRA's liquidity standard.

RADI Licences

A restricted ADI (RADI) licence grants permission for an organisation to conduct banking business in Australia for a limited period, subject to requirements and restrictions. As a temporary licence, a RADI is often used while organisations prepare for their full ADI licence application.

  • Finalised Internal Capital Adequacy Process (ICAAP). Meets requirements of all capital related prudential standards.

  • A corporate entity that possesses a Restricted ADI license.

    This license, issued by APRA under section 9 of the Banking Act, allows a corporate entity to operate a banking business in Australia for a limited time, subject to certain conditions and restrictions.

  • High-level structure established, with key personnel essential for Restricted ADI operations already in position and senior roles crucial to ADI functions identified and prepared for recruitment. Complies with the requirements of the relevant accountability regime.

  • Technology strategy outline and implementation roadmap, including details on selected or considered products, services, and service providers.

  • While not mandatory, Restricted ADIs should be prepared to show how they will fulfill customer obligations during disruptions—this can be included as part of the scenario planning in the business plan.

  • Capital management plan tailored to match the activities during the restricted phase.

  • High-level liquidity risk appetite and funding strategy designed to meet liquidity needs during the restricted phase, ensuring adequate financial resources to maintain compliance with liquidity requirements.

Three common entity types

  • Representative office

    What: An overseas bank wishing to only perform liaison and research activities in Australia. It must not conduct banking business or activities related to the administration of banking business.

    Supervision: Not subject to prudential supervision, but requires annual attestation of compliance.

    Requirements: A letter from the overseas bank’s home supervisor to confirm it has permission to open a representative office in Australia.

    Cost: $10,000 application fee, then $3,000 per year monitoring fee.

  • Foreign branch

    What: An overseas bank wishing to conduct banking business and provide services to wholesale clients in Australia may do so as a foreign ADI – deposit-taking activities are limited to above AU$250,000.

    Supervision: Some ADI standards apply in a modified manner, with limited governance requirements.

    Foreign branch: Letter to APRA from the overseas bank’s home supervisor with approval to establish a branch in Australia and confirming it is in good financial standing and meets the prudential requirements.

    Cost: $110,000 application fee.

  • Foreign subsidiary

    What: A separate legal entity from an overseas bank’s parent. It will need to meet all local capital and regulatory requirements including having local governance arrangements, such as a Board. Generally, all banking activities are allowed with no limitations on customer type.

    Supervision: All relevant ADI prudential standards apply.

    Requirements: Letter to APRA from the overseas bank’s home supervisor with approval to establish a branch in Australia and confirming it is in good financial standing and meets the prudential requirements.

    Cost: $110,000 application fee.

Applying for a bank licence -Lemoigne can help

Lemoigne provides a variety of services and capabilities designed to assist international organizations in obtaining banking authorizations and licenses. Here are the main areas where we offer support:

  • The application process with APRA is intricate and demands considerable investment of time and resources from applicants.

    The Lemoigne Licensing team is equipped to guide you through the application intricacies and provide continuous support with our expertise, market insights, and specialized skills, including:

    • an initial feasibility study

    • business case presentation to the regulator

    • business plan and financial projections

    • other licence applications (AFSL, ACL)

    • relevant tax and ASIC registrations

    • Financial Sector Shareholdings Act (FSSA) and Foreign Investment Review Board (FIRB)

    • development of core risk policies

    • assistance with the APRA onsite preparation

    • assistance with relevant APRA meetings.

  • One prerequisite for obtaining an ADI or RADI license is crafting a comprehensive five-year business plan. Lemoigne can create this for you, aligning with your vision and market entry strategy, which includes detailed five-year financial forecasts, key risks, and other essential elements of your risk framework.

    Additionally, Lemoigne will assist in defining your strategic value proposition for entering a competitive new market and ensure that your business plan fully leverages this proposition.

  • The licensing procedure with APRA necessitates the completion of various documents to showcase IT readiness.

    Lemoigne’s Technology Advisory team, with its vast experience in supporting licensing applications, provides customized services in technology, operating models, IT architecture, vendor selection frameworks, and market scanning.

  • Organizations need to prove to APRA that they are prepared and capable of operating within the Australian market, including having a strong framework for meeting data quality and reporting standards.

    Lemoigne possesses extensive experience in regulatory reporting, as well as in improving regulatory reporting operating models and data governance frameworks across the industry. Our expertise is evidenced by our collaborations with numerous prominent banks to address their data quality and other reporting issues in compliance with APRA's regulations.

  • The Australian Securities and Investment Commission (ASIC) mandates that banks be licensed to provide specific products and services. Two crucial licenses that Lemoigne can assist you in obtaining are:

    • Australian Financial Services Licence (AFSL) – this license is required from the inception of any business offering financial services, with a provision for a limited AFSL under certain conditions.

    • Australian Credit Licence (ACL) – this license is necessary from the start for any business that offers credit services.

    Lemoigne’s dedicated team of legal experts can guide you through ASIC’s requirements to obtain or modify an AFSL or ACL.

  • In Australia, various registrations are necessary for an entity to acquire and keep an ADI or RADI license. Lemoigne can assist you in preparing the required documents and navigating the application process.

    The types of registrations include:

    • Australian Registered Body Number (ARBN) – an ARBN allows an organization to operate across all Australian states and territories. Lemoigne will verify the availability of your business name, compile the necessary supporting documents, and prepare the forms for submission.

    • Tax File Number (TFN) – all businesses in Australia need a tax file number.

    • Other registrations – there might be additional registrations needed for tax purposes. Lemoigne can help you identify which ones are applicable to your business and assist with the application process.

  • The Financial Sector (Shareholdings) Act 1998 (FSSA) plays a crucial role in safeguarding the Australian financial sector from monopolization or unfair competition. Under the FSSA, the threshold for both foreign and domestic acquirers is set at 20 percent.

    Lemoigne can collaborate with you to ensure your organization complies with the Act and, if necessary, assist in the approval process for exceeding the 20 percent threshold.

Why Us?

“Lemoigne boasts top-tier credentials in the licensing domain, featuring extensive cross-jurisdictional expertise that enables us to customize our services to meet your specific requirements.”

“Our proven methodology provides forward-thinking insights that enable successful entry into the Australian banking sector. Lemoigne has supported numerous applications, including those of prominent banks, global investment banks, international fintech companies, and purchased payment facility providers from various regions including Europe, the UK, the USA, Asia, and Australia.”

 FAQs

  • The Australian Prudential Regulatory Authority (APRA) is the Australian Government regulator responsible for ensuring our financial system is stable, competitive and efficient. One of APRA’s responsibilities is to grant bank licences in Australia. Learn more about APRA.

  • ASIC is Australia's integrated corporate, markets, financial services and consumer credit regulator. They are an independent Australian Government body that are set up under, and administer, the Australian Securities and Investments Commission Act 2001 (ASIC Act). Learn more about ASIC's role.

  • Every applicant Lemoigne has supported with their bank licensing application through to completion, has successfully obtained a bank license:

    Lemoigne has:

    • has a very strong success rate when it comes to helping our clients obtain a bank licence

    • has the highest number of bank licensing credentials in the market

    • is the adviser for the most recent foreign ADI and RADI licences in Australia.

  • Based on your organization's specific needs, Lemoigne offers a versatile approach along with a spectrum of capabilities.

    Typically, our clients opt for a mix of services depending on their available resources and their current stage in the process. Two popular services include:

    • You Lead, We Support – where your organization spearheads the application process, and we provide guidance and support, including reviewing the documents before submission.

    • We Lead, You Confirm – where Lemoigne drafts the initial documentation for your review. In this scenario, a Lemoigne specialist collaborates closely with your team, incorporating feedback and expertise from both sides to craft the application.

  • Lemoigne Bank Licensing team can help local and international organisations set up operations in Australia and obtain an ADI licence. Support includes:

    • providing market research and competitor analysis reports to help clients make informed decisions

    • defining an approach for the organisation

    • preparing a tailored business plan that supports a client’s vision and go-to-market strategy

    • preparing draft core risk policies to ensure APRA’s regulatory requirements are met

    • operational readiness support to successfully pass the APRA onsite review.

  • An international bank aiming to offer banking services to wholesale clients in Australia can operate as a foreign ADI by setting up an Australian branch. This branch is considered part of the same legal entity as its head office. While foreign ADIs are not required to meet APRA's capital requirements, they must comply with other local regulatory obligations relevant to their operations. For more details on licensing options for locally-incorporated ADIs, further information is available.

    The foreign ADI license is APRA's authorization for an overseas bank to conduct banking business in Australia under specific conditions.

  • A foreign bank representative office is an establishment of an overseas bank in Australia, created with the approval of APRA. This office must satisfy minimum entry requirements and adhere to specific operational conditions stipulated by APRA.

    In certain instances, banks from abroad may utilize the representative office as a local hub for their international clients, although it cannot function as an authorized deposit-taking institution.

    Additionally, this type of office can serve as a valuable tool for brands looking to conduct market research or increase brand awareness in Australia prior to establishing a legal entity to engage in banking activities.

  • Engaging a specialized adviser has become an essential component of securing a successful ADI license application in Australia.

    APRA has implemented critical prudential standards such as CPS 220 Risk Management, CPS 230 Operational Risk Management, CPS 234 Information Security, among others, and has updated their licensing approach, significantly revised in August 2021.

    Considering the stringent regulatory demands and the high standards set by APRA for foreign entities entering the Australian banking sector, it is strongly advised to engage a specialized adviser early in your licensing process.

    An adviser with extensive experience in the market and familiarity with the application processes can clarify your organization's strategy and long-term goals, and provide a comprehensive understanding of the regulatory hurdles. Being well-prepared in these aspects is crucial for a smooth transition to operational status.

  • In their respective approval processes, specific roles play a crucial part.

    For a foreign ADI application, appointing a general manager early is advisable to facilitate a smooth application process and provide APRA with a consistent point of contact for your Australian operations. Although this appointment isn't mandatory for the application, it's beneficial for coordination.

    For a representative office application, appointing the chief representative is a mandatory part of the submission. While this appointment can technically be made later, it is best practice to choose the chief representative officer as soon as the application process begins, to ensure effective representation and compliance.

  • APRA has refined its approach to new entrants, informed by a deeper understanding of the financial and operational challenges faced by applicants trying to establish themselves in the sector. The updated strategy emphasizes aspects such as long-term business sustainability, capital requirements, and exit planning.

    The motivation for these changes in the licensing framework is to enhance financial safety and increase the success rate of applications. However, the heightened stringency of the requirements has made the application process more intricate, demanding considerable time and resources from applicants.

  • The Financial Sector (Shareholdings) Act 1998 (FSSA) plays a crucial role in safeguarding the Australian financial sector against monopolization and unfair competition.

    Under the FSSA, both foreign and domestic acquirers are subject to a 20 percent ownership threshold. Any exceptions to exceed this limit are at the discretion of the Treasurer, who holds the authority to approve higher ownership stakes or mandate reductions in shareholdings.

    For foreign stakeholders, decisions by the Treasurer are informed by recommendations from the Foreign Investment Review Board (FIRB). This Board evaluates foreign investment proposals under the Foreign Acquisitions and Takeovers Act 1975 and associated regulations, ensuring they align with national interests.