(22 April 2013 – Australia) The financial regulator, Australian Prudential Regulation Authority (APRA) has proposed tougher rules on non-bank finance companies that accept retail deposits, following a string of collapses in the “shadow banking” sector.
In new proposals published over the weekend, APRA said it would restrict companies that operate outside the Banking Act from using terms such as 'deposit' and 'at call' accounts.
Currently there are no restrictions on use these phrases by finance companies, which are regulated much more lightly than banks.
Under the proposed changes, APRA said it would remove an exemption that allows finance companies to use these terms, to avoid confusion among retail investors.
It also said it would require debenture products to have a minimum maturity of 31 days.
The crackdown comes after a spate of failures among finance companies that accepted debentures, including the A$660 million collapse of Banksia last year.