What Licences Do Banks & ADIs Need in Australia?9 min read

Introduction

Carrying on banking business in Australia requires an authorised deposit-taking institution (ADI) licence from the Australian Prudential Regulation Authority (APRA).

A bank’s deposit-taking status is only the starting point: the financial services it provides may require an Australian Financial Services Licence (AFSL), consumer credit may require an Australian Credit Licence (ACL), & Australian Transaction Reports and Analysis Centre (AUSTRAC) & other regulatory requirements may also apply. This overview is for banks, ADIs & fintechs assessing a banking licence or related approval.

APRA Authorisation to Carry On Banking Business

What Is Banking Business?

Under Section 9 of the Banking Act 1959 (Cth) (‘Banking Act‘), carrying on banking business in Australia requires an ADI licence from the APRA. Banking business consists of both:

1. taking deposits, other than as part-payment for identified goods or services; and
2. making advances of money.

Other financial activities prescribed by regulations made under the Banking Act may also fall within the definition, & only corporations may carry on banking business in Australia. A business that only provides finance without taking deposits does not require an ADI licence from APRA, although it may still need registration with APRA under the Financial Sector (Collection of Data) Act 2001 (Cth).

Locally Incorporated ADIs

The locally incorporated pathway is the main route for Australian banks, building societies, credit unions & other domestic ADIs. An applicant must obtain APRA authorisation under Section 9 of the Banking Act before conducting banking business.

APRA’s proposed framework requires a locally incorporated body corporate to demonstrate that it meets the ADI Licensing Criteria within 12 months of lodging its application. The criteria are intended to be legally effective, while the ADI Licensing Guidelines will explain APRA’s expectations without creating enforceable requirements.

Restricted ADIs

The Restricted ADI (RADI) pathway allows a new entrant to conduct limited banking business for a maximum of two years while developing the resources & capabilities needed to meet the full prudential framework. The pathway was intended to assist applicants that were not ready to establish a full ADI immediately.

APRA confirmed in May 2026 that it is discontinuing the RADI pathway because of its limited take-up and the difficulties some applicants experienced. The revised framework will apply the same licensing criteria to all applicants, with the final licensing criteria & guidelines expected in late 2026.

Foreign ADIs

An overseas bank may operate in Australia as a foreign ADI through an Australian branch serving wholesale clients. The branch forms part of the same legal entity as its overseas head office, rather than operating as a separate Australian subsidiary.

Retail banking requires a locally incorporated subsidiary ADI. That subsidiary is a separate legal entity with local capital requirements & local governance arrangements, including a local board. An overseas bank applicant must also satisfy APRA that it is adequately supervised in its home country & has obtained consent from its home supervisor to establish the Australian banking operation.

Australian Financial Services Licence Requirements

Deposit-Taking Products

An ADI may conduct banking business under its ADI licence, but financial services activities may require an AFSL or an applicable exemption. APRA states that this requirement applies to ADIs providing financial services.

Making deposit-taking facilities available to clients is an AFSL-regulated activity. These facilities are financial products under Section 764A(1)(i) of the Corporations Act 2001 (Cth) (‘Corporations Act‘), so an ADI providing them must hold an AFSL or rely on an applicable exemption.

Financial Product Advice & Dealing

Providing financial product advice or dealing in a financial product can trigger AFSL obligations for a bank or other financial institution. Financial product advice includes recommending a financial product to a client or the public.

Dealing activities can include:

• buying or selling financial products for a client; or
• issuing interests in a managed investment scheme.

An ADI carrying out these activities must ensure its AFSL authorisations, or an applicable exemption, cover the services being provided, & may wish to consult AFSL lawyers for banks and ADIs.

Non-Cash Payment Facilities

Non-cash payment facilities may fall within the Chapter 7 financial product regime. Under Section 763D of the Corporations Act, providing these facilities can trigger AFSL requirements.

This means an ADI offering payment facilities must assess:

• whether the facility is a regulated financial product; and
• whether its AFSL authorisations cover the relevant service.

Other Financial Products & Services

Banks may provide other regulated services involving foreign exchange, securities, derivatives, or investments. These activities can require further AFSL authorisations in addition to the ADI licence.

The required authorisations depend on the financial products & services offered. An ADI must ensure its AFSL arrangements cover each regulated activity it conducts, unless an exemption applies.

Australian Credit Licence Requirements

Home Loans & Personal Lending

An ADI that provides credit under a credit contract may be engaging in a credit activity. Under the National Consumer Credit Protection Act 2009 (Cth) (‘NCCP Act‘), that activity can require an ACL or authorisation from a credit licensee before the business begins.

The relevant assessment depends on whether the credit contract is covered by the National Credit Code & whether an exemption applies. Credit activity may include:

• providing credit under a credit contract;
• exercising the rights or performing the obligations of a credit provider; and
• suggesting or assisting with a particular credit contract.

Credit Cards & Other Consumer Credit

An ADI status does not, by itself, replace the need to consider Australian credit licensing requirements. Issuing credit cards or providing other forms of consumer credit may involve credit activity, & the provider must assess whether the activity relates to credit covered by the National Credit Code, whether the licensing requirements apply & whether an exemption is available. Holding an AFSL does not remove the need to separately assess ACL requirements.

Commercial Lending

Genuinely business-purpose lending usually falls outside the National Credit Code. A financial institution that only provides this type of lending may not face the same ACL requirements that apply to regulated consumer credit.

The classification depends on the type & purpose of the credit. Lending businesses must assess whether their activities involve credit covered by the National Credit Code and whether any exemption applies under the NCCP Act or the National Consumer Credit Protection Regulations 2010 (Cth).

Responsible Lending Obligations

The provided material identifies consumer credit licensing as the relevant requirement for credit activities but does not set out the separate responsible lending obligations in detail. It confirms that activities involving credit covered by the National Credit Code must be assessed against the licensing requirements in the NCCP Act, considering the nature of the credit activity, the type of credit involved & whether an exemption applies. 

AUSTRAC & AML/CTF Requirements

Accounts & Deposits

An ADI providing account or deposit-taking services is providing designated services for AML/CTF purposes. Under Section 6(2), Table 1, items 1–7 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (‘AML/CTF Act‘), relevant activities include:

• opening accounts;
• adding account signatories;
• carrying out account transactions;
• accepting deposits;
• issuing cheque books or debit cards; and
• accepting electronic funds transfer instructions.

These activities make the ADI a reporting entity with obligations under the AML/CTF Act.

Lending Services

Making loans or providing finance is a designated service for AUSTRAC purposes. The financial services identified by AUSTRAC include loans or finance, including hire-purchase arrangements.

An ADI that provides lending services must assess its obligations as a reporting entity under the AML/CTF Act. The ADI licence permits banking business, but it does not remove the separate AML/CTF requirements connected with providing finance.

AUSTRAC Enrolment

A business providing a designated service with a geographical link to Australia is a reporting entity. This applies according to the service being provided, rather than merely the business structure or the fact that the entity is an ADI.

A reporting entity must enrol with AUSTRAC. An ADI providing account, deposit-taking, lending or other designated financial services must assess the geographical link requirement before commencing those services.

AML/CTF Program & Customer Due Diligence

A reporting entity has anti-money laundering, counter-terrorism financing & counter-proliferation financing obligations under the AML/CTF Act. These obligations include maintaining appropriate AML/CTF arrangements, assessing relevant risks & applying customer due diligence.

The required arrangements depend on the designated services provided, the entity’s activities & the relevant risks. AUSTRAC identifies AML/CTF policies, risk assessment & customer due diligence as core areas for reporting entities to address.

Other Approvals & Regulatory Requirements for Banks & ADIs

Banking Group & Ownership Approvals

Corporate structure can create approval requirements alongside an ADI licence. APRA may require an authorised non-operating holding company (NOHC) where an applicant’s structure includes a holding company, with authorisation assessed under Section 11AA of the Banking Act.

Ownership also requires review under the Financial Sector (Shareholdings) Act 1998 (Cth). A person or group proposing to hold voting power above the 20% shareholding limit must obtain approval from the Treasurer, or from APRA under delegation. These approvals may need to be addressed as part of the banking licence application process.

Using Bank, ADI & Other Restricted Terms

A financial business that is not an ADI must obtain APRA consent before using restricted terms under Section 66 of the Banking Act. The restriction covers terms such as:

• “bank”, “banker” & “banking”
• “neobank”, “banc” & “banq”

APRA intends consent to be limited to rare circumstances. An ADI may use the term “bank” under Section 66AA of the Banking Act, subject to the conditions applying to that use. An ADI licence applicant may request consent to reserve a company or trading name containing a restricted term after lodging its application.

AFCA Membership & External Dispute Resolution

AFCA membership may arise through AFSL or ACL requirements. Separate obligations apply to ADIs providing services designated under the Scams Prevention Framework (SPF).

Covered entities were required to belong to an authorised external dispute resolution scheme by 1 September 2026. AFCA will handle SPF complaints from 31 March 2027, when most SPF obligations are scheduled to commence. 

Financial Accountability Regime

The Financial Accountability Regime Act 2023 (Cth) applies to ADIs & their authorised NOHCs. These entities have been accountable entities under the Financial Accountability Regime since 15 March 2024.

The regime is jointly administered by APRA & the ASIC. It imposes strengthened responsibility & accountability obligations on financial institutions, directors & senior executives, with the stated purpose of improving risk & governance cultures.

Conclusion

An APRA ADI licence is the core authorisation for carrying on banking business in Australia. It does not replace the separate AFSL, ACL, AUSTRAC obligations, or other approvals triggered by a bank’s services, ownership & structure.

With that framework in mind, contact AFSL House to assess the approvals relevant to a proposed banking, payments or crypto business. Our NSW-based AFSL lawyers at AFSL House can help clarify the application process, licensing requirements & regulatory obligations, making it easier to plan the next steps with confidence.

Frequently Asked Questions