The Australian Prudential Regulatory Authority is to impose stricter conditions on applicants for deposit-taking licences following the recent collapse of digital challenger Xinja and the sale of 86 4000 to National Australia Bank.
A review undertaken into Australia's licensing regime found the approach needed a greater focus on longer term sustainability, rather than the short-term ambition of receiving a licence.
Under the new guidelines, restricted Authorised Deposit Taking institutions (ADIs) must achieve a limited launch of both an income-generating asset product and a deposit product before being granted a full licence.
There is also increased clarity around capital requirements at different stages for new entrants, who will also be expected to have more advanced planning for a potential exit, including a focus on return of deposits as an option.
Apra deputy chair John Lonsdale says the updated approach would help to ensure that newly-licenced banks are better equipped to succeed.
“Since launching the Restricted ADI regime three years ago, we’ve gained a deeper understanding of the challenges new and aspiring banks face as they try to establish themselves in an industry that is capital intensive and dominated by some of the best resourced companies in Australia," he says. “This revised approach effectively targets key risks for new entrants, setting a higher bar for gaining a bank licence, while enhancing competition by making it more likely new entrants can find their feet and gain a firm foothold in the market."
A consultation on the proposals closes on 30 April.