Introduction

Australian banking businesses operate under separate Australian Prudential Regulation Authority (‘APRA’) and Australian Securities and Investments Commission (‘ASIC’) regimes when developing or expanding financial products. APRA authorisation permits a body corporate to conduct banking business, while an Australian Financial Services Licence (‘AFSL’) covers specified financial services involving regulated financial products.

An AFSL strategy must reflect the business’s products, services, client categories and operating structure; an APRA banking authorisation does not automatically replace an AFSL. This article explains when banking businesses may need an AFSL, how to select authorisations, and what ASIC application requirements apply alongside APRA regulation.

When Do Banking Businesses Need an AFSL?

Identifying Which Financial Services Trigger AFSL Requirements

A banking business must hold an AFSL when it carries on a financial services business in Australia, unless a statutory exemption or valid representative arrangement applies. Section 911A(1) of the Corporations Act 2001 (Cth) (‘Corporations Act‘) requires the AFSL to cover the financial services provided.

Section 766A(1) of the Corporations Act identifies financial services that may trigger the requirement, including:

• Providing financial product advice
• Dealing in financial products
• Making a market for financial products
• Providing custodial or depository services

The test depends on the activities performed, not whether the business describes itself as a bank, financial institution or fintech.

Assessing Deposit Products & Non-Cash Payment Facilities

Deposit-taking facilities made available by an authorised deposit-taking institution (‘ADI’) in the course of its banking business are financial products under Section 764A(1)(i) of the Corporations Act. Transaction accounts, savings accounts and term deposits may therefore require AFSL coverage for the relevant dealing activities.

Section 763A(1)(c) of the Corporations Act includes certain non-cash payment facilities within the financial product framework. Digital wallets, electronic payment facilities and payment applications should be assessed by their legal structure. Section 765A(1)(h)(ii) of the Corporations Act excludes certain facilities where payments are debited to an excluded credit facility.

Distinguishing ASIC Licensing from APRA Banking Authorisation

ASIC licensing and APRA banking authorisation serve different purposes. Under Sections 8 and 9 of the Banking Act 1959 (Cth) (‘Banking Act‘), a body corporate may need written authority from APRA to carry on banking business in Australia.

An AFSL under the Corporations Act covers specified financial services involving specified financial products. APRA authorisation does not automatically replace an AFSL, and an AFSL does not authorise banking business requiring APRA approval. A banking business should assess both regimes separately, including whether an exemption applies to a particular service.

What AFSL Authorisations Do Banking Businesses Need?

Selecting Authorisations for Dealing & Financial Product Advice

Under Section 766C(1) of the Corporations Act, dealing in a financial product includes applying for, acquiring, issuing, varying or disposing of the product. Under Section 766C(2) of the Corporations Act, arranging for another person to undertake those activities may also constitute dealing, unless the conduct is financial product advice.

Section 766B(1) of the Corporations Act defines financial product advice as a recommendation or statement of opinion intended, or reasonably regarded as intended, to influence a decision about a financial product, while Section 766B(2) of the Corporations Act distinguishes between personal advice and general advice.

A banking business providing either dealing services or financial product advice should select authorisations that cover the relevant activity and product class.

Aligning Authorisations with Banking Products & Client Types

Section 761G of the Corporations Act establishes the distinction between retail and wholesale clients. A banking business providing transaction accounts to individual customers will need to assess retail client coverage, while a business providing derivatives to institutional counterparties must assess whether those counterparties satisfy the statutory wholesale client tests.

The product and distribution model also affect the required AFSL authorisations. A bank issuing its own deposit or investment product may require dealing authorisations as the issuer, while an entity arranging customer access to a product issued by another person may require authorisations covering that distribution activity.

Client classification must be assessed under the statutory tests; a business customer is not automatically a wholesale client because it operates through a company.

How Should Banks Structure Their AFSL Arrangements?

Evaluating Independent AFSLs Versus Authorised Representative Models

A bank or banking subsidiary may hold its own AFSL for the financial services it provides. This structure gives the entity direct control over its authorised services, products and client categories. However, the licensee must meet its own obligations under Section 912A of the Corporations Act, including:

• organisational competence;
• compliance with licence conditions; and
• supervision of representatives.

Alternatively, a subsidiary may provide services as an authorised representative of another licensee. Section 911A(2)(a) of the Corporations Act provides an exemption where the service is provided as a representative of a person holding an AFSL that covers the service. The exemption only applies where the subsidiary is acting on the licensee’s behalf, so a subsidiary that issues its own deposit or payment products may not be able to rely on it for that activity (Australian Securities and Investments Commission v BPS Financial Pty Ltd [2025] FCAFC 74). In addition, Section 916A of the Corporations Act requires the authorisation to be given in writing and limits the representative’s activities to services covered by the principal licensee’s AFSL. Ultimately, corporate ownership alone does not extend an AFSL to every entity within a banking group.

Navigating Licensing for Banking Subsidiaries & Digital Platforms

A banking group may establish separate entities for deposits, payments, wealth management or investment services. Each entity’s activities should be assessed separately, because an AFSL, representative appointment or exemption held by one entity does not automatically cover another entity.

Digital banking arrangements may involve an ADI, a fintech platform and a technology provider. The parties should identify which entity:

• issues the product;
• performs regulated dealing;
• provides financial product advice;
• communicates with customers; and
• supervises the service.

A fintech distributing deposit products may need its own AFSL or authorised representative coverage, while a provider performing only administrative or technical functions may not provide a financial service. Foreign banks must also assess whether their Australian activities are covered by an AFSL or a specific exemption. For example, Section 8 of ASIC Corporations (Foreign Licensees and ADIs) Instrument 2026/121 (Cth) (‘ASIC Instrument 2026/121‘) only relieves a foreign ADI from holding an AFSL where it deals in derivatives or foreign exchange contracts on its own behalf, with wholesale clients, to manage financial risk arising in the ordinary course of its banking business, and not as a market maker.

What Should a Banking AFSL Application Strategy Include?

Proving Organisational Competence & Meeting Fit-and-Proper Tests

Section 912A(1)(e) of the Corporations Act requires an AFSL holder to maintain the competence needed to provide its authorised financial services. ASIC’s Regulatory Guide 105: AFS Licensing—Organisational Competence (‘RG 105’) explains that responsible managers should collectively have knowledge and experience suited to the proposed activities, including:

• deposit products;
• payment facilities;
• derivatives;
• foreign exchange; and
• financial product advice.

Section 913B(1)(c) of the Corporations Act requires ASIC to be satisfied that the fit-and-proper person test in Section 913BA is met. The assessment may extend to the applicant, its officers, controllers and officers of corporate controllers. On 16 October 2026, ASIC streamlined some evidence requirements for responsible managers who are also accountable persons under the Financial Accountability Regime, but this did not remove the organisational competence obligation in Section 912A(1)(e).

Coordinating the ASIC Assessment Process with APRA Requirements

Section 913B(1) of the Corporations Act requires ASIC to grant an AFSL only where the application meets the statutory conditions, including that ASIC has no reason to believe the applicant is likely to contravene its Section 912A obligations and that the fit-and-proper requirement in Section 913BA is met. Under Section 913B(3) of the Corporations Act, ASIC may request further information, an audit report or a statement about material changes. If the applicant does not lodge the requested material within the specified period, the application is taken to have been withdrawn under Section 913B(4B).

A banking business seeking both authorisations should coordinate its ASIC application with its application under Section 9 of the Banking Act, with support from AFSL lawyers for banking businesses where needed. The business descriptions, entity structures, proposed activities, management details and governance arrangements should remain consistent across both processes, while recognising that ASIC and APRA apply separate statutory tests.

When Should Banking Businesses Review Their AFSL Strategy?

Managing New Financial Products & Corporate Restructuring

A banking business should review its AFSL strategy before launching new financial products, including:

• deposit products;
• payment facilities;
• derivatives; or
• investment products.

The review should confirm the product’s legal classification and whether the existing AFSL authorisations cover the financial services the business will provide.

Corporate changes also require review. Mergers, acquisitions, subsidiary formations and internal transfers may change the entity responsible for issuing products or providing financial services. An AFSL granted to one licensee does not automatically transfer to another legal entity, even where the entities belong to the same banking group.

Determining the Need for Additional Authorisations or Licence Variations

A banking business may need an AFSL variation when proposed services, products or client categories fall outside its existing licence conditions. This may include:

• adding a financial service;
• adding a product class;
• introducing retail services; or
• changing a restriction that limits the business to wholesale clients.

Under Section 914A of the Corporations Act, ASIC may impose, vary or revoke AFSL conditions, including after receiving an application from the licensee under Section 914A(2)(b). Where the licensee applies for a variation, Section 914B of the Corporations Act requires ASIC to consider whether the fit-and-proper person test in Section 913BA is met for the licence as varied, allows ASIC to refuse the application if it is not, and treats the application as withdrawn if the licensee does not lodge requested information in time. Where the licensee is, or is related to, an ADI, Section 914A(5) of the Corporations Act makes the Minister, rather than ASIC, responsible for imposing, varying or revoking a licence condition that would prevent the ADI from carrying on all or any of its banking business, and the Minister must first consider ASIC’s advice given after ASIC has consulted APRA.

Conclusion

Australian banking businesses need an AFSL strategy that matches their financial products, services, client categories and operating structures, while recognising that an AFSL under the Corporations Act and APRA authorisation under the Banking Act serve different purposes. Reviewing authorisations before launching products, changing distribution arrangements or restructuring an entity helps the business address ASIC application requirements, identify variation needs and maintain appropriate licensing coverage.

With these requirements in mind, contact the AFSL lawyers at AFSL House to discuss your AFSL strategy, application, authorisation selection, licence variation or ongoing licensing compliance. AFSL House assists banking and financial services businesses with matching their licensing arrangements to their proposed operations, helping them plan their regulatory requirements with greater clarity.

Frequently Asked Questions

Disclaimer: All information provided in this article is strictly general in nature and is not intended to be, nor should it be relied upon as, legal advice.