The list of businesses and sectors affected by the COVID-19 health crisis appears to be never ending and now it seems that new banks will also be dealt a blow by the ongoing global pandemic.
The Australian Prudential Regulation Regulation Authority (APRA) sent out a letter this week, stating that it would be suspending the granting of new banking licences for approximately six months.
As an independent statutory authority, the APRA is both answerable to the Australian government and responsible for supervising banking, insurance and superannuation.
This means that any aspiring banking institution will have to go through the APRA first to get an Authorised Deposit-Taking Institution licence (ADI) and be recognised as legitimate. In short, this type of licence means that balances up to $250,000 per customer, should be protected under the government’s Financial Claims Scheme.
Why have the APRA suspended new licences?
In its letter, the APRA expressed concerns over any new institution’s ability to succeed in the current economic climate. In the interests of maintaining the stability of the Australian economy, the authority made the decision to put a pause on handing out new banking licences.
The APRA wrote:
In licencing new entrants to the prudential-regulated segments of the financial system, APRA aims to achieve an appropriate balance between financial safety and other important considerations to the community - efficiency, competition, contestability and competitive neutrality. In doing this, APRA is also asked to promote financial system stability in Australia.
Experience has shown that it is challenging for new entrants to succeed even under normal economic conditions, which is why APRA does not consider it prudent to licence APRA-regulated entities at this time.
Who will the suspension of APRA licences affect?
This latest move will affect any new financial ventures or companies that may have been planning to launch in 2020. So any banks, credit unions, insurance companies or superannuation funds, which all rely on getting a licence from the APRA, may be forced to put their plans on hold for the foreseeable future.
If you’ve put your name on a waiting list for a snazzy new fintech or bank lately, then you may find that the wait will be longer than expected. The APRA has promised to carry on assessing current licence applications in the meantime, but expects that the actual ‘giving-out’ of new licences will remain on-hold, unless the situation changes.
Of course, this doesn’t mean that you can’t still personally review where you stash your funds at the moment. In fact, now might be the perfect time to do some research on other banks, if you’ve been thinking about making the change lately. Maybe your current bank doesn’t quite align with your values or maybe you’re after a transaction account with more features, either way why not look into it now while you have time on your hands.
You could start by heading to Mozo’s compare bank accounts page or see if any of the everyday transaction accounts below call to you. Unsure about whether you want to switch right now? Read our guide on changing bank accounts for more information on what shifting your funds entails.
Compare bank accounts - last updated November 21, 2020
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