APRA issues stern warning
(18 April 2010 – Australian) The Australian Prudential Regulation Authority (APRA) has warned foreign banks that are currently sniffing around the Australian market without a full banking licence that they cannot solicit deposits or other types of funding from retail customers.
APRA, the banking industry watchdog, has sent a letter to all licensed banks and authorised deposit-taking institutions (ADI’s) saying that it will crack down on any overseas group that breaches rules on retail fund-raising.
The warning was issued after APRA was approached last week by a number of unlicensed foreign banks looking to engage in transactions with domestic-based corporate customers from their offshore offices.
Under current regulations this type of business is not opposed when it involves Australian banks as counterparties; however the watchdog felt the need to emphasise its powers in an effort to protect retails customers from abuse.
The regulations that the authority will be looking to heavily enforce range from a ban on unlicensed overseas banks soliciting business from individuals, to a rule that prevents authorised foreign institutions from taking deposits of less than A$250,000 unless they have special exemption.
APRA said that it would prefer all foreign banks doing business here to come under its wide-ranging powers and by allowing them to undertake limited dealings foreign banks would have to strictly ring-fence any domestic contacts.
As a result, those institutions are unable to open an office in Australia, have staff permanently based here or use people employed by another bank through which it conducts its business locally.
And as well as being prevented from soliciting business from retail customers, such banks have to ensure that all dealings are clearly undertaken and booked offshore in locations that are subject to recognised legal and regulatory jurisdictions.
The authority says it wants to ensure that any transactions done with banks - whether licensed here or not - are properly supervised. It stressed that it has never been inclined to grant a ''brass plate'' licence to foreign institutions - a reference to examples in loosely regulated countries where banks have been allowed to operate in almost name only.
The warning was issued after APRA was approached last week by a number of unlicensed foreign banks looking to engage in transactions with domestic-based corporate customers from their offshore offices.
Under current regulations this type of business is not opposed when it involves Australian banks as counterparties; however the watchdog felt the need to emphasise its powers in an effort to protect retails customers from abuse.
The regulations that the authority will be looking to heavily enforce range from a ban on unlicensed overseas banks soliciting business from individuals, to a rule that prevents authorised foreign institutions from taking deposits of less than A$250,000 unless they have special exemption.
APRA said that it would prefer all foreign banks doing business here to come under its wide-ranging powers and by allowing them to undertake limited dealings foreign banks would have to strictly ring-fence any domestic contacts.
As a result, those institutions are unable to open an office in Australia, have staff permanently based here or use people employed by another bank through which it conducts its business locally.
And as well as being prevented from soliciting business from retail customers, such banks have to ensure that all dealings are clearly undertaken and booked offshore in locations that are subject to recognised legal and regulatory jurisdictions.
The authority says it wants to ensure that any transactions done with banks - whether licensed here or not - are properly supervised. It stressed that it has never been inclined to grant a ''brass plate'' licence to foreign institutions - a reference to examples in loosely regulated countries where banks have been allowed to operate in almost name only.
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