Non-ADI lenders – you may need to register with APRA

Introduction

The Financial Sector (Collection of Data) Act 2001 (Act) imposes obligations on registrable corporations to comply with requirements to provide information to the Australian Prudential Regulation Authority (APRA).

The Act generally applies to any corporation which, either itself or through its subsidiaries, engages in the provision of finance in the course of carrying on a business in Australia. However, previously, there were a number of exemptions which limited the scope of which corporations required registration.

On 5 March 2018, Treasury Laws Amendment (Banking Measures No.1) Act 2018 (Amendment) became law. The Amendment extends the application of the registration requirements in the Act to a wider number of non-ADIs by replacing existing exemptions with other exemptions which are more limited in nature.

APRA registration

Under the Amendment, the new limited exemption means that any corporation involved in the business of providing finance will be a registrable corporation if:

• it has outstanding debts due to it resulting from the provision of finance which are at least $50 million or
• in the previous financial year it made loans (or other financing arrangements) under which it provided $50 million.

When determining whether the amount owing to the lender corporation exceeds $50 million, APRA will treat each related corporation as being part of the relevant lender corporation.

Lenders that fall into this category will need to register with APRA and provide:

• a statement in writing setting out:
  • the name, the place and date of incorporation and the address of the registered office of the corporation
  • the name, and the address of the registered office, of every corporation that is related to the corporation
  • particulars of the principal methods by which the corporation ordinarily borrows money and
  • particulars of the principal kinds of finance ordinarily provided by the corporation
• a copy of the last audited balance-sheet of the corporation and
• if there is no such balance-sheet or where the balance sheet does not distinguish between Australian and non-Australian assets or liabilities – a statement showing the assets and liabilities in Australia of the lender corporation.

Timing

Corporations to which the legislation applies will need to register and provide documentation to APRA by 4 May 2018.

Reporting

Following registration, APRA will require a registered corporation to report either monthly or quarterly in relation to its financial position using its Direct2APRA platform.

From 1 July 2019, registered corporations will also be required to appoint an auditor and audit the corporation in accordance with the requirements of RRS710.0 ABS/RBA Audit requirements for Registered Financial Corporations – EFS collection.

Banking Act

Changes were also made to Part IIB of the Banking Act. If APRA considers the provision of finance by an RFC will ‘materially contribute to risks of instability in the Australian financial system’, APRA may determine rules to manage those risks, though no such rules have been released so far.

What you need to do?

Non-ADI lenders that may be considered registerable corporations will need to act quickly to confirm whether they are covered by the new legislation, especially as registration and documentation will be due and need to be lodged with APRA by 4 May 2018.

Additionally, RFCs will need to ensure that their existing audit regimes are in compliance with the new requirements under RRS 710.0 when it commences from 1 July 2019.