APRA warning to overseas banks – SMH

Posted on April 18, 2011 by


FOREIGN banks looking to do business in Australia without a full banking licence have been warned that they cannot solicit deposits or other types of funding from retail customers.

The Australian Prudential Regulation Authority, which oversees the banking industry, has written to all licensed banks and deposit-taking institutions to tell them that it will crack down hard on any overseas group that breaches its strict rules on retail fund-raising.

The move comes after APRA disclosed last week that it has been approached by several unlicensed foreign banks seeking to conduct transactions with domestic-based corporate customers from their offshore offices.

While not opposed to this type of business when it involves Australian banks as counterparties, APRA has felt the need to underline its powers designed to protect retail customers from abuse.

These range from an absolute ban on unlicensed overseas banks from soliciting business from individuals to a rule that prevents authorised institutions from taking deposits of less than $250,000.

The $250,000 ”minimum” is designed to stop licensed deposit-takers from funding their activities purely from retail customers instead of using their own resources. This rule now covers a broader range of financial instruments such as securities, bonds, debentures and derivatives.

APRA has made it clear that it would prefer all foreign banks doing business with Australia to come under its wide-ranging powers.

But in allowing them to undertake limited dealings, the regulator stated in a letter sent out four days ago that such overseas 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.

APRA says it wants to ensure that any transactions done with banks – whether they are licensed here or not – are properly supervised.


Posted in: APAC