The Banking Act 1959 (Banking Act) places restrictions on financial businesses using certain words and expressions related to banking. APRA just released some updated guidelines.
Under sections 66 and 66A of the Banking Act, only persons that have been granted approval by APRA can use the following words or expressions in Australia in relation to their financial business (unless an exception in the Banking Act applies):
- ‘bank’, ‘banker’ and ‘banking’;
- ‘building society’, ‘credit union’, ‘credit society’ and ‘credit co-operative’;
- ‘authorised deposit-taking institution’; and
- ‘ADI’ (except where these letters are used as part of another word).
Similar words and expressions, whether in English or other languages, are also restricted. These restrictions apply to any ‘financial business’, meaning a business that includes or relates to the provision of financial services, whether or not in Australia.
APRA only grants permission for financial businesses that are not authorised deposit-taking institutions (ADIs) to use these restricted words or expressions in very rare or unusual circumstances.
If your business is a financial business that is not an ADI, and you wish to use a restricted word or expression, you need to make an application to APRA for approval.
If your business is not a financial business and you propose to use a company name or business name that contains a restricted word or expression, you are still required to obtain confirmation from APRA that section 66 or 66A does not apply before registering the name with the Australian Securities and Investments Commission (ASIC).
Under the Banking Act, there is no restriction on an ADI using the restricted expressions ‘authorised deposit-taking institution’ and ‘ADI’. An ADI is also permitted to use the restricted words ‘bank’, ‘banker’ and ‘banking’ unless APRA determines otherwise. Applicants for authorisation as an ADI should contact APRA about the circumstances in which it may be permissible to use a restricted word or expression.
It is an offence for a person to use a restricted word or expression in Australia in relation to a financial business, except where APRA has granted a consent or exemption, or where a statutory exception applies. The penalty for this offence is 50 penalty units for each day that a restricted word or expression is used. At the time of publication of these guidelines, 50 penalty units is equivalent to $10,500 for an individual and $52,500 for a corporation.
APRA has granted the following types of financial businesses a class consent under section 66, allowing them to use certain restricted words or expressions:
- building societies;
- credit unions;
- trustees of ADI staff superannuation funds;
- foreign banks issuing securities in parcels not less than $500,000; and
- offshore banking units.
