More competitive loans and other financial products for Australians will be encouraged through new reforms announced by the Turnbull Government in the 2017 Budget.
The Turnbull Government is getting on with the job of implementing our Budget measures which will deliver a fairer and stronger financial system for Australians.
New entrants to the Australian banking market face a simple but significant obstacle – the prohibition on the use of the word 'bank'.
Currently, only authorised deposit-taking institutions (ADIs) with capital greater than $50 million are permitted to use the term 'bank'.
This acts to discourage innovative new players from entering the market, as the use of the term ‘bank’ can be key to their business model at the critical early phase of their development.
The restriction on ‘bank’ may also lead the public to mistakenly believe that small banking businesses differ from the larger players in terms of regulatory protection.
The fact is that all ADIs are subject to the prudential regulator, APRA's, prudential framework.
Likewise, deposits at all ADIs are protected by the Government’s Financial Claims Scheme guarantee.
That is why the Turnbull Government has announced that it will lift the prohibition on the use of the word 'bank'.
The Government is today releasing draft legislation for public consultation that will ensure that any banking business with an ADI licence will be allowed to describe itself as a bank.
In addition, the legislation will reinforce APRA’s discretion over whether or not to permit the use of 'bank', ensuring that community expectations around the application of the term are maintained.
This is part of the Turnbull Government’s series of strong financial reforms aimed at encouraging greater competition in our financial system, which will ensure Australians and Australian businesses can get a better deal.
The exposure draft of the legislation and the associated explanatory material is available on the Treasury website.
Submissions are due by Monday 14 August 2017 and can be sent to: useofbank@treasury.gov.au. The Government encourages all interested parties to make a submission.