Financial institution Financial institutions, sometimes called banking institutions, are business entities that provide services as intermediaries for different types of financial monetary transactions. Broadly speaking, there are three major types of financial inst ...

s in

Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...

are only permitted to accept

deposits A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, Transaction account#Current accounts, current accounts or any of several othe ...

from the public if they are authorised deposit-taking institutions (ADIs). The ADI’s authority is granted by the

Australian Prudential Regulation Authority 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 re ...

(APRA) under the ''Banking Act 1959'' (Cth). The term was adopted to formalise the right of non-bank financial institutions — such as

building societies A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially savings and mortgage lending. Building societies exist in the United Kingdo ...

credit union A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit organization, nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including depo ...

s and

friendly societies A friendly society (sometimes called a benefit society, mutual aid society, benevolent society, fraternal organization or ROSCA) is a mutual association for the purposes of insurance, pensions, savings or cooperative banking. It is a mutual org ...

— to accept such deposits. All ADIs are subject to the same prudential standards as

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

s but for a corporation to use word '

', '

building society A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially savings and mortgage lending. Building societies exist in the United Kingd ...

' and '

' in its name, it must meet certain requirements. The concept of an ADI replaced that of "bank" following the recommendations of the

Wallis Report Australian securities law relates to securities issued by corporations as well as other securities, including debentures, stocks and bonds issued by governments, and interests in managed investment schemes. Australian securities regulation res ...

in March 1997. The statutory requirements of an ADI are elucidated in case ''Commissioners of the State Savings Bank of Victoria v Permewan, Wright & Co Ltd'' (1914). 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 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 Volt Bank was an Australian consumer neobank, the first such bank to be issued with a restricted ADI licence by APRA. In June 2022, the bank announced it would permanently close its deposit-taking business and voluntarily return its banking ...

Australian government deposit guarantee

Since 2008, as part of the response to the

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, 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. The government clarified that Australian-incorporated subsidiaries of foreign banks in Australia are covered in the same way as local banks.

References

External links

APRA - Register of authorised deposit-taking institutions
Banking in Australia Banking terms {{bank-stub

Restricted ADI

Australian government deposit guarantee

See also

References

External links