Authorised deposit-taking institution

Last updated • 2 min readFrom Wikipedia, The Free Encyclopedia

Financial institutions in Australia are only permitted to accept deposits from the public if they are authorised deposit-taking institutions (ADIs). The ADI’s authority is granted by the Australian Prudential Regulation Authority (APRA) under the Banking Act 1959 (Cth). [1]

Contents

The term was adopted to formalise the right of non-bank financial institutions — such as building societies, credit unions and friendly societies — to accept such deposits. All ADIs are subject to the same prudential standards as banks but for a corporation to use word 'bank', 'building society' and 'credit union' in its name, it must meet certain requirements.

The concept of an ADI replaced that of "bank" following the recommendations of the Wallis Report in March 1997. [2]

The statutory requirements of an ADI are elucidated in case Commissioners of the State Savings Bank of Victoria v Permewan, Wright & Co Ltd (1914). [3] The case was seminal in characterising essential elements of a bank as being the collection of money by receiving deposits upon loan, repayable when and as expressly or impliedly agreed upon, and the utilisation of the money by lending it again in such sums as are required. If this is the institution's real and substantial business, and not merely an ancillary or incidental branch of another business, they are deemed to be a bank.

Restricted ADI

On 4 May 2018, APRA created a restricted ADI (RADI) framework [4] [5] to assist potential new entrants to the banking industry, particularly small firms with limited financial resources, to navigate the licensing process. Eligible entities can conduct a limited range of business activities for two years. On 7 May 2018, APRA issued the first RADI to Volt Bank. [6]

Australian government deposit guarantee

Since 2008, as part of the response to the global financial crisis, the Australian government set up the Financial Claims Scheme (FCS) to provide protection to depositors in ADIs in the event that an ADI fails. The FCS guarantees certain deposits (currently up to $250,000 for each account holder at any ADI incorporated in Australia). All deposits held by an account holder with a single financial institution are added together towards the FCS limit, including accounts with any other business that the ADI operates under a different trading name.

Initially, there was uncertainty as to whether deposits in foreign-owned banks were covered by the FCS, leading to a great outflow of funds from these banks. [7] The government clarified that Australian-incorporated subsidiaries of foreign banks in Australia are covered in the same way as local banks.

See also

Related Research Articles

The Australian Prudential Regulation Authority (APRA) is a statutory authority of the Australian Government and the prudential regulator of the Australian financial services industry. APRA was established on 1 July 1998 in response to the recommendations of the Wallis Inquiry. APRA's authority and scope is determined pursuant to the Australian Prudential Regulation Authority Act, 1998 (Cth).

Bank regulation is a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, designed to create market transparency between banking institutions and the individuals and corporations with whom they conduct business, among other things. As regulation focusing on key actors in the financial markets, it forms one of the three components of financial law, the other two being case law and self-regulating market practices.

The Australian financial system consists of the arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims in Australia, comprising:

Banking in Australia is dominated by four major banks: Commonwealth Bank of Australia, Westpac Banking Corporation, Australia and New Zealand Banking Group, and National Australia Bank. There are several smaller banks with a presence throughout the country, and a large number of other financial institutions, such as credit unions, building societies and mutual banks, which provide limited banking-type services and are described as authorised deposit-taking institutions (ADIs). Many large foreign banks have a presence, but few have a retail banking presence. The central bank is the Reserve Bank of Australia (RBA). The Australian government’s Financial Claims Scheme (FCS) guarantees deposits up to $250,000 per account-holder per ADI in the event of the ADI failing.

Deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability.

HSBC Bank Australia Limited was granted a banking licence in 1986 by APRA having been established as HSBC Finance Company Limited in 1965. It is part of the worldwide HSBC Group. HSBC Bank Australia is a foreign bank in Australia, offering a wide range of banking products and services to the retail, commercial, corporate and institutional sectors.

CUA (company) Australias largest credit union

CUA is a credit union based in Brisbane, Queensland, Australia. It is the largest member-owned financial institution in Australia. It offers banking, health and insurance services to around 500,000 Australians.

The most important difference between non-banking financial companies and banks is that NBFCs don't take demand deposits. A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFI facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations. Alan Greenspan has identified the role of NBFIs in strengthening an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment which act as backup facilities should the primary form of intermediation fail."

Bank Financial institution that accepts deposits

A bank is a financial institution that accepts deposits from the public and creates Demand Deposit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

ME Bank Australian direct bank

ME Bank, also known as ME, is an Australian direct bank based in Melbourne, Victoria. ME Bank also has offices in Sydney, Brisbane, Adelaide, Perth, Hobart, Canberra and Darwin.

Financial regulation in Australia is extensive and detailed.

Cuscal

Cuscal Limited is an Australian company that predominantly provides transactional banking, liquidity and capital management services and products to institutional customers including credit unions, mutual banks and superannuation funds. Cuscal is regulated by the Australian Prudential Regulation Authority (APRA) as an Australian authorised deposit-taking institution (ADI), and by the Australian Securities and Investments Commission (ASIC). It is a member of EFTPOS Payments Australia and the Australian Payments Clearing Association. Cuscal has an A+ credit rating.

Police Bank Ltd. is an Australian, member-owned mutual bank. Founded as NSW Police Credit Union (PCU) on 24 October 1964 by a group of officers from the Clarence Street Police Station in Sydney, its members passed a resolution to enable "Police Credit Union" to become "Police Bank Ltd." on 3 December 2012.

ING Australia

ING Bank (Australia) Limited is a direct bank operating in Australia. It is a wholly owned subsidiary of the multinational Dutch bank, ING Group. ING Australia holds an Australian banking licence as a foreign subsidiary company.

In Australia, charitable investment fundraisers (CIF) are not-for-profit entities with charitable purposes that take deposits from the public to finance those charitable purposes. CIFs may apply for an exemption from the requirement to hold an Australian Financial Services Licence (AFSL) if the “financial products” they provide is limited to the issue of debentures or the running of managed investment schemes. For example, the solicitation of secured loans that are paid back with interest are considered debentures. Such deposit taking entities have since 2003 also been exempted from certain requirements of the Banking Act 1959. Also, as charities, these entities enjoy tax and other exemptions and benefits.

Judo Capital

Judo Bank is an Australian Challenger Bank focused on small and medium-sized enterprise lending.

Volt Bank

Volt Bank is an Australian consumer neobank, and was the first such bank to be issued with a restricted ADI licence by APRA.

Xinja is an Australian neobank. Xinja was founded by CEO Eric Wilson and received the second RADI licence issued by the Australian Prudential Regulation Authority (APRA).

References

  1. APRA, " List of Authorised Deposit-taking Institutions " Archived 2014-07-30 at the Wayback Machine , APRA, November 2017
  2. Alan L Tyree (2000). "The Australian Payments System". Banking and Finance Law Review. Archived from the original on 2012-04-07. Retrieved 2012-03-20.
  3. [1914] HCA 83
  4. "APRA finalises new Restricted Authorised Deposit-taking Institution licensing framework". APRA. 4 May 2018.
  5. Dodd, Jo; Lauer, Marina; Wong, Ashley. "New banks, new rules: APRA updates ADI licensing regime". KWM. Retrieved 16 May 2018.
  6. "APRA authorises Restricted ADI". APRA. Retrieved 7 October 2018.
  7. "ING Direct lost AU$1.5bn in deposits during financial crisis". news.com.au. News Limited. 3 April 2009. Retrieved 12 May 2015.