Australian bank licensing

ADI licence cost in AUD

$110,000 application fee

Definition and authority

An ADI that has recently been granted an ADI licence and is subject to an adjusted supervisory approach.

An ADI licence is an authority granted by APRA under section 9 of the Banking Act to permit a body corporate to conduct banking business in Australia, with or without conditions, that is not limited by time.

Board and management

Majority independent board and committees in place. All key senior management identified. Meets requirements of APRA governance standards. Meets the requirements of the applicable accountability regime.

Liquidity

Meets requirements of APRA's liquidity standard.

Information technology

Fully developed – IT systems meet the requirements of relevant prudential standards and have regard to the expectations of PPGs and information papers.

Business continuity

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

Capital

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

APRA’s application process is complex and requires significant time and resource investments from applicants.

The KPMG Licensing team can help you navigate the application requirements and support you throughout the journey with our expertise, market knowledge and specialised capabilities, 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 of the requirements to secure an ADI is to prepare a detailed five-year business plan. KPMG can develop this for you, supporting your vision and go-to-market strategy including five-year financial projections, material risks and other core aspects of your risk framework.

KPMG will also help you define your strategic value proposition for entry into a new, competitive market and help you draft a business plan to effectively capitalise on this proposition.

The licensing process with APRA requires a number of documents to be completed to demonstrate readiness from an IT perspective.

KPMG’s Technology Advisory team has extensive experience in supporting licensing applications and can offer a variety of tailored services around technology, operating model and IT architecture, vendor selection frameworks and market scanning.

Organisations must be able to demonstrate to APRA that they are ready and able to operate in the Australian market. This includes a robust framework to meet their data quality and reporting requirements.  

KPMG has a depth of experience in regulatory reporting as well as enhancing regulatory reporting operating models and data governance frameworks across the industry. Our deep knowledge is demonstrated through our work with a number of high-profile banks to remediate their data quality issues and other reporting matters under APRA’s requirements.

The Australian Securities and Investment Commission (ASIC) requires banks to be licensed to offer certain products and services. Two important licences KPMG can help you to attain are: 

• Australian Financial Services Licence (AFSL) – this licence must be held from day one of any business providing financial services. There is an option for a limited AFSL in some circumstances.
• Australian Credit Licence (ACL) – this licence must be held from day one of any business providing credit services.

KPMG’s dedicated team of legal specialists can help you navigate ASIC requirements and receive or modify an AFSL or ACL.

In Australia, there are a series of registrations required for an entity to gain and maintain an ADI. KPMG will help you prepare the necessary documents and guide you through the application process.

The types of registrations include: 

• Australian Registered Body Number (ARBN) – an ARBN allows an organisation to trade in all Australian states and territories. KPMG will will support you in checking the availability of your business name, collate the necessary supporting documentation and prepare the forms to be lodged.
• Tax File Number (TFN) – all businesses operating in Australia must have a tax file number.
• Others – there may be other registrations required for tax purposes. KPMG can help you to identify which are relevant to your business, and help you apply.

The Financial Sector (Shareholdings) Act 1998 (FSSA) is a key piece of legislation protecting the Australian financial sector from monopolisation or unfair competition. The threshold for foreign and domestic acquirers under the FSSA is 20 percent.

KPMG can work with you to ensure your organisation is compliant with the Act, and if required, assist with the approval process where the 20 percent threshold needs to be exceeded.

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.

KPMG has extensive experience assisting foreign banking entities from various jurisdictions with their market entry strategies into the Australian banking sector. Our support includes:

• Conducting market analysis and feasibility studies to help foreign banks evaluate their entry into the Australian banking sector.
• Assisting foreign banks in establishing their Australian Representative Office.
• Guiding foreign banks through the process of upgrading their Representative Office to a Foreign Bank Branch.

Depending on your organisation’s needs, we can offer a flexible approach and a range of capabilities.

In practice, many of our clients tend to choose a combination of options, depending on what resources they have at hand, and where they are in the process. Two common options include:

• You do, we review – where the applying organisation takes the lead in the application process and we provide advice and support, including a review of completed documents before they are submitted.
• We do, you review – where we produce the first draft of the documentation for client review. Here, a KPMG specialist will work closely with our client to develop the application while coordinating input from their team and other KPMG subject matter experts.

KPMG’s 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 in alignment with APRA’s regulatory requirements
• operational readiness support to successfully pass the APRA onsite review.

An overseas bank that wishes to conduct banking business and provide services to wholesale clients in Australia may do so as a foreign ADI, by establishing an Australian branch. An Australian branch of a foreign ADI forms part of the same legal entity as its head office. Foreign ADIs are not subject to capital requirements by APRA, but will need to meet other local regulatory requirements applicable to its business. Learn more about Licensing pathways for locally-incorporated ADIs.

A foreign ADI licence is the APRA authorisation for an overseas bank to conduct banking business in Australia, with conditions.

A foreign bank representative office is the office of an overseas bank established in Australia with APRA’s consent. They must meet minimum entry standards and comply with certain operating conditions, set by APRA.

In some cases banks from other countries can use the representative office as a local base for their international customers (but not as an authorised deposit-taking institution).

This office can also be useful for brands wishing to perform market research or brand awareness, before creating a legal entity to be able to conduct banking business in Australia.

Having a specialised adviser has become a crucial step for a successful ADI licence application in Australia.

APRA has released key prudential standards such as CPS 220 Risk Management, CPS 230 Operational Risk Management, CPS 234 Information Security and others. At the same time, they refreshed their licensing approach (which was substantially revised in August 2021).

Given regulatory requirements and the high bar APRA sets for foreign applicants looking to enter the banking sector in Australia, we would highly recommend selecting a specialised adviser ahead of your licensing journey.

An adviser with deep experience in the market and application processes can help your organisation be clear about its strategy and long-term business aspirations, as well as providing a thorough understanding of the regulatory challenges before starting the ADI application process. Being well-prepared in these areas will be key to a smooth transition into becoming operational.  

Both figures are key to their approval processes.

For a foreign ADI application, the general manager should be appointed as soon as possible in order for your application to proceed smoothly,  and so that APRA has a single point of contact for your Australian entity. However, this appointment is not a requirement of the application.

For a representative office application, the chief representative appointment is required as part of the application submission and while it can be appointed at a later stage, the best practice is to select the chief representative officer as soon as practicable once the application process commences.

The chief risk officer (CRO) is a key figure for a foreign ADI. Ideally, they should be hired as early as possible. However, in most cases we see foreign branches hiring a CRO after APRA issues the application invoice to an entity to formally commence the licensing process.

Once APRA is satisfied with your application documentation, they will send you the invoice to pay the application fee.

Every foreign entity in Australia is required to register as a foreign company with ASIC and obtain a TFN during the licensing application process.

You can apply for these licences after your entity has paid the application fee to commence the licensing approval process with APRA.

APRA has evolved its approach to new entrants as it has gained a greater understanding of the financial and operational challenges applicants face in gaining a foothold into the sector. The revised approach places more focus on areas such as the long-term business sustainability of the business, capital requirements and exit planning.

The rationale behind the changes to the licensing framework are aimed at enhancing financial safety as well as increasing the number of successful applications. However, the new approach does have more stringent requirements which has made the overall application process more complex and requires significant time and resourcing investment from applicants.

The Financial Sector (Shareholdings) Act 1998 (FSSA) is a key piece of legislation protecting the Australian financial sector from monopolisation or unfair competition.

The threshold for foreign and domestic acquirers under the FSSA is 20 percent. The ability to exceed this threshold is solely at the discretion of the treasurer, who has the power to allow for greater ownership stakes or to instruct individuals of the necessity to diminish their stake.

For foreign clients, the treasurer will be advised by the Foreign Investment Review Board (FIRB). The role of the Board is to examine proposed investments in Australia that are subject to the Foreign Acquisitions and Takeovers Act 1975 and supporting legislation and covered by the policy.