Financial Services in Focus – Issue 103

Consultation on sustainable investment labels

On 18 July, the Treasury announced that the Government is starting its public consultation on sustainable investment product labelling. The initiative is intended to enhance investor confidence by introducing clear labelling standards on investment products.

The consultation paper, Sustainable Investment Product Labels, is a key step in implementing the Government’s Sustainable Finance Roadmap. This consultation process aims to develop a clear framework for labelling financial products as ‘sustainable’, ‘green’, ‘ethical’ or similar, and help investors and consumers understand the meaning of these terms when applied to financial products.

This phase of consultation will continue until 29 August 2025. The outcomes of the consultation will inform the sustainable investment labelling regime, which is expected to be implemented in 2027.

APRA consults on minor updates to Health Benefits Fund Enforcement Rules 2015

On 14 July, APRA released a consultation letter outlining proposed updates to the Private Health Insurance (Health Benefits Fund Enforcement) Rules 2015 (Rules). These updates aim to keep the Rules current and ensure their continued application beyond their scheduled sunset date of 30 September 2025.

The proposed changes include updates to the titles of legislation referenced within the Rules, minor corrections, and removal of the transition arrangements provisions. Some minor updates are also proposed to address amendments to the Corporations Act made after the Rules were made in 2015. APRA is not proposing changes to the policy settings underpinning the Rules.

Stakeholder feedback on the proposed updated Rules are invited until 8 August 2025.

A draft version of the Private Health Insurance (Health Benefits Fund Enforcement) Rules 2025 is available here, with APRA aiming to release a final version of the Rules in September this year.

Public consultation for ASX Clear (Futures) Dynamic Default Fund Framework proposal 

On 21 July, ASX released a consultation paper titled ‘ASX Clear (Futures) Dynamic Default Fund Framework’.

The proposed dynamic framework is a significant change from the existing ASX Clear (Futures) Fixed Default Fund and would result in the size of the Default Fund and Clearing Participant variable commitments being recalculated on a monthly basis (subject to a total Default Fund floor of $650 million and cap of $1.3 billion).

ASX would continue to contribute $450 million to the total Default Fund and commit a tranche ahead of the Default Fund contribution of Clearing Participants sized at 20 per cent of the total Default Fund. ASX also proposes to make changes to replenishment obligations and recovery assessments to align with the introduction of the Dynamic Default Fund.

The public consultation period will close on 1 September 2025.

AUSTRAC unveils 2025-26 priorities to crack down on financial crime

On 17 July, AUSTRAC released further information about its regulatory expectations and priorities for 2025–26. CEO Brendan Thomas said financial crime damages Australia’s financial system and this year’s focus is on preparing to regulate ‘tranche 2’ industries and targeting gaps in high-risk sectors such as cash and digital currencies. 

‘We’re about to embark on the most ambitious overhaul of Australia’s anti-money laundering laws in a generation and we’re determined to get it right,’ Mr Thomas said.

For further information on AUSTRAC’s regulatory priorities and what it expects from reporting entities and Tranche 2 entities as the reforms approach, you can read our previous article, Countdown to AML/CTF reforms: AUSTRAC outlines what’s required.

AUSTRAC provides updated guidance to assist customers who don’t have standard forms of identification

On 17 July, AUSTRAC updated its guidance document for assisting customers who don’t have standard forms of identification when accessing financial services. 

Customers may be unable to provide standard identification documents if they are from diverse backgrounds, facing challenging circumstances, or experiencing vulnerability. The updated guidance helps to develop and implement policies to assist these customers, while managing ML/TF risks and meeting AML/CTF obligations.

Updates to the guidance include:

• a new section on the importance of financial inclusion;
• clearer steps on how to use the procedures;
• clarification that alternative identification can be used for customers who are not low ML/TF risk;
• more information on managing the risks of accepting alternative identification, without placing undue burden on the customer;
• recently expired identification can be used as a form of alternative identification;
• alternative identification can continue to be relied on when a customer faces systemic and long-term barriers to accessing standard identification (ie long-term homelessness); and
• other methods that could be used to accept referee statements, such as video.

APRA announces update on macroprudential settings

On 23 July, APRA announced it will maintain its current macroprudential settings following a review of financial conditions and risks both domestically and internationally. APRA confirmed that the mortgage serviceability buffer will remain at 3 percentage points and that the countercyclical capital buffer will also be held at 1 per cent of risk-weighted assets.

In deciding to keep its settings on hold, APRA took account of high levels of household debt and above-average total credit growth, which is expected to rise further as interest rates decline. Lower inflation and interest rates have eased financial pressures on borrowers, labour market conditions remain tight, bank lending standards remain sound, and non-performing loans remain low. However, the risk of economic shocks from the uncertain geopolitical environment is elevated.

In anticipation of potential risks, APRA indicated its intention to consult with regulated entities on implementation aspects of different macroprudential tools to manage lending risks.

ASIC probes debt management and credit repair services

On 22 July, ASIC announced it will launch a review into the debt management and credit repair sector as part of its continued focus on protecting consumers, particularly those experiencing financial hardship.

ASIC’s surveillance will review how the sector, comprised of around 100 licensees, complies with the law. It will seek to understand the varying debt management and credit repair business models in operation.

ASIC intends to publish insights from the review in a public report in 2026.

Updates to the AFCA Approach to Responsible Lending

On 11 July, AFCA released the changes implemented to the Responsible Lending Approach (Approach) following the check-in consultation with financial firms and consumer groups about how the Approach is operating in practice, which was conducted in February 2025. 

• AFCA received written and verbal feedback which generally covered five key themes:
• the Approach enables early settlements and resolutions;
• there is still work to do to ensure the Approach is applied consistently throughout AFCA’s complaints process;
• further clarification of some loss calculation concepts is required;
• more definitive guidance about common serviceability assessment queries is requested; and
• the scope of the Approach should be expanded to cover more issues like unjust transactions, pre-NCCP Act loans, and broker conduct. 

AFCA made several changes to the Approach based on the feedback received in the check-in consultation, including that it:

• amended language on page 6 to reflect the passage of the new Low-Cost Credit Contracts regulatory regime, including the new ASIC Regulatory Guide 281: Low cost credit contracts.
• inserted a new summary paragraph on page 22 about how lenders may resolve inconsistency between benchmarks, declared expense amounts, and verification material;
• clarified on page 25, that APRA guidance on interest rate buffers applies to ‘residential mortgage loans’;
• updated loss calculation table on page 37 with examples to clarify meaning;
• clarified, on page 42, when AFCA may consider holding costs, acquisition costs and sale costs as part of a consumer’s gross loss; and
• clarified language on page 53 about capital gain and capital loss for home loans.

APRA consults on amendments to phase out AT1 Capital

On 8 July, APRA announced it has begun consulting on proposed changes to its bank prudential and reporting frameworks to phase out Additional Tier 1 (AT1) capital instruments.

A consultation paper, draft prudential standards, draft reporting standards, and draft prudential practice guides are available here.

ASIC proposes updates to guidance for industry codes of conduct

On 24 July, ASIC announced it is seeking industry feedback on proposed updates to Regulatory Guide 183: Approval of financial services sector codes of conduct (RG 183).

RG 183 provides guidance on ASIC’s role in relation to financial services sector codes (code), the criteria for code approval by ASIC, and the process for obtaining (and retaining) ASIC approval for a code.

The proposed updates intend to ensure the currency and clarity of guidance on ASIC’s regulatory approach to approving industry codes of conduct by:

• reflecting legislative reform since the guidance was last updated, including changes to the industry codes of conduct regime under the Financial Sector Reform (Hayne Royal Commission Response) Act 2020;
• clarifying ASIC’s role in relation to industry codes, as well as the criteria and process for approval of a code; and
• simplifying the existing guidance where possible

The public consultation period closes on 1 September 2025. A copy of the proposed updates and further information can be found here.

Project Acacia: RBA and DFCRC announce chosen industry participants for tokenised asset settlement research project

On 10 July, Treasury announced a significant milestone in Project Acacia, with a number of industry participants selected to explore how innovations in digital money and existing settlement infrastructure might support the development of Australian wholesale tokenised asset markets. 

Project Acacia is a collaborative initiative between the RBA and the Digital Finance Cooperative Research Centre (DFCRC), with support from ASIC and APRA. Project Acacia is a central component of the Government’s March 2025 Statement on Developing an Innovative Australian Digital Asset Industry.

24 use cases have been conditionally selected for the next phase of Project Acacia, including:

• 19 pilot use cases, which will involve real money and real asset transactions; and
• five proof‑of‑concept use cases involving simulated transactions.

The use cases involve a range of asset classes, including fixed income, private markets, trade receivables and carbon credits. Proposed settlement assets for the use cases include stablecoins, bank deposit tokens, and pilot wholesale central bank digital currency, as well as new ways of using banks’ existing exchange settlement accounts at the RBA.

Testing of use cases will occur over the next six months. A final report outlining the findings from Project Acacia is expected to be released in the first quarter of 2026. The findings will inform the RBA’s ongoing research into how digital innovation can enhance the efficiency and resilience of Australia’s wholesale financial markets.

You can read more about this in our update here.

ASIC proposes to remake disclosure relief for offers of foreign securities and interests to Australian investors

On 9 July, ASIC announced it is seeking feedback on its proposal to remake six sunsetting legislative instruments that provide disclosure relief.

The relief enables Australian investors to participate in offers that might not otherwise be extended to them, in situations where:

• a foreign offeror has complied with a disclosure regime offering similar levels of investor protection to the Australian disclosure requirements; or
• very few offers are made to Australian investors.

ASIC proposes to remake the legislative instruments on largely the same terms, for a period of five years. Some of the key changes include:

• a consolidated exemption for authors or publishers in draft instrument ASIC Corporations (Foreign Securities – Incidental Advertising) Instrument 2025/XX;
• rewording the declaration in draft instrument ASIC Corporations (Foreign Small Scale Offers) Instrument 2025/XX to remove ambiguity about when it applies and who it applies to; and
• removing definitions that are now contained in the Corporations Act 2001.

ASIC is inviting feedback on its proposal to remake the legislative instruments up until 15 August 2015, which are due to sunset on 1 October 2025. 

You can find all the proposed legislative remakes here.

ASIC proposes to remake five financial reporting-related legislative instruments

On 7 July, ASIC announced it is seeking feedback on its proposal to remake five legislative instruments relating to financial reporting relief. The legislative instruments are scheduled to sunset on 1 October 2025. The legislative instruments are:

• ASIC Corporations (Non-Reporting Entities) Instrument 2015/841;
• ASIC Corporations (Post Balance Date Reporting) Instrument 2015/842;
• ASIC Corporations (Related Scheme Reports) Instrument 2015/839;
• ASIC Corporations (Stapled Group Reports) Instrument 2015/838; and
• ASIC Corporations (Externally-Administered Bodies) Instrument 2015/251.

ASIC has assessed these instruments and determined that they are operating effectively and efficiently. 

Under the proposal, the effect of the instruments will remain unchanged. ASIC proposes to make minor amendments to ensure the instruments are up-to-date and in line with ASIC’s current drafting style. ASIC also proposes to clarify that the relief in Instrument 2015/251 is not intended to apply to registrable superannuation entities.

The public consultation period closes on 1 August 2025. You can find the proposed instrument remakes here.

APRA's prudential standard on operational risk management comes into force

As of 1 July, APRA announced that its new Prudential Standard CPS 230 Operational Risk Management (CPS 230) came into force. CPS 230 sets a higher standards of operational risk management for banks, insurers, and superannuation funds that are regulated by APRA. It reflects APRA’s growing focus on ensuring that institutions can maintain critical operations and services to the community during periods of disruption, such as cyber-attacks, system outages or failures within key service providers.

Under CPS 230, regulated entities are required to identify their critical business services and functions that, if disrupted, could have a material impact on financial markets, customers, or the broader economy. These requirements build upon the foundations established in Prudential Standards CPS 220 and SPS 220, which set out broader operational risk management obligations.

For each critical operation, entities must now establish disruption tolerance thresholds and demonstrate how they will remain within these limits under a range of stress scenarios. Entities must test their business continuity planning to identify vulnerabilities to ensure they are positioned to overcome severe disruptions and enhance their third-party risk management by ensuring risks from material service providers are identified and appropriately managed. 

Entities must update their existing arrangements with material service providers by 1 July 2026 to meet the new requirements of CPS 230. APRA’s practical guide, published in June 2024, outlines APRA’s recommended practices to support compliance with CPS 230.