If you aspire to start a bank in Australia, PFS Consulting can help.
The PFS team has been involved in numerous APRA and ASIC licencing projects including Banks (ADIs), Restricted ADIs (RADIs) and Insurers. PFS has firsthand experience of the challenges, APRA’s expectations and requirements, and how to manage what can be a complex and lengthy process. We can help avoid pitfalls and navigate the pathway from concept to successfully writing business in Australia.
What is APRA proposing?
In late July 2025, APRA released a discussion paper outlining proposals to make ADI licensing requirements clearer and to make licensing decisions faster and more transparent. APRA also floated the idea of discontinuing the RADI licence pathway reflecting limited uptake and stakeholder concerns around the requirements.
Since introducing the current framework in 2018, APRA has licensed 17 new banks, with around half being domestic start-ups. During the same period, APRA granted 7 RADI licences. Regardless of the pathway, the process has proven lengthy (averaging 20 months vs. 12 months internationally) and complex, with unclear expectations spread across multiple guidelines. Currently there are no RADI licenses held in the market, with several exiting and some moving to full ADI status.
Importantly, the 20 month period APRA quotes does not take into account the time elapsed from when the entity itself starts preparing for licensing to the time APRA starts its measurement of license time.
Overall, APRA’s proposals are intended to align with the objectives of the Council of Financial Regulators’ (CFR) and the Australian Competition and Consumer Commission’s (ACCC) recent review into small and medium-sized banks.
The key proposed changes are
1. Clearer Licensing Criteria
APRA has proposed formal, targeted criteria requiring applicants to demonstrate they:
- Can be effectively supervised by APRA
- Have sufficient financial and non-financial resources
- Possess suitable skills and experience
- Maintain adequate risk management frameworks
- Can credibly respond to viability threats
.
2. Streamlined Process
- 12-month timeframe for applicants to meet criteria
- 3-month decision period following the assessment phase
- Public disclosure of all licensing decisions, including refusals
.
3. RADI Pathway Review
The Restricted ADI pathway, designed as an easier entry route, has seen limited uptake and proven challenging for applicants. APRA is considering discontinuing this pathway due to capital-raising difficulties and operational challenges
Has the RADI pathway run its course?
APRA stated that the review of its licensing framework was “…part of its standard practice of reviewing practices and policies…”, however to the informed observer (and those who have been through the licensing process especially) know that for RADIs change is needed if competition is going to improve.
“I suspect there’s probably a more measured way to do it”, says Angus McBean, referring to the overall ADI licensing process. Currently CEO of Neeon Finance, Mr McBean has worked both here and overseas with the likes of Deutsche Bank, HSBC, Regional Australia Bank and G&C Mutual Bank including, among other things, as CRO and CFO. But it was his time as CFO of Volt Bank and Chief Governance Office at Alex Bank where he gained firsthand experience of the Restricted ADI and Full ADI licensing process.
Mr McBean firmly believes that a different approach to licensing is needed. “I think there should be a linear approach” he says, referring to the idea that the licensing process should be structured around a series of milestones, each one reflecting a levelling up of the entity’s progress towards being fully compliant with prudential and licensing requirements. This contrasts to the current RADI approach which requires significant capital to even put together what would essentially be a start-up bank with very limited operations.
“The unintended consequence is that new entrants often have quite grandiose plans need to attract capital and build on a set premise from the outset. They often weren’t building on a simple proposition and iterating from there” Mr McBean says.
The end result has been that new entrants focussed on areas of banking, especially retail, which are already extremely well serviced by the majors and others, in order to build a compelling story to secure the capital needed to meet the licensing hurdles.
Madeleine Mattera, Head of Risk Advisory at PFS, has witnessed the outcomes of such approaches first hand, specifically exits from markets. Having worked with APRA in the ADI licensing space, Madeleine thinks now is a good time for a change. “If competition and innovation are the goals, then the licensing pathway needs to support that” she says.
While a number of RADIs have progressed to Full ADI licence, a number have exited the market at RADI or Full ADI stage. With no RADIs currently operating in the market, the RADI experiment is regarded as less than a stellar success.
What could be next?
APRA’s proposals appear to signal a shift in thinking. This is supported by APRA’s plans to support small and medium-sized banks following the Council of Financial Regulators review into small and medium-sized banks.
At this stage APRA have not signaled any changes to the licensing requirements for other regulated sectors such as Insurers and registrable Superannuation Entities. While insurers may be limited to certain classes of business, neither super nor insurance has attracted a ‘Restricted’ alternative entry pathway.
The PFS Consulting team have considerable experience in RADI and ADI Licensing as well as Insurer and Registrable Superannuation Entity licensing for local and overseas market entrants. PFS has managed APRA and ASIC (AFSL) licensing processes end-to-end including governance, risk and capital requirements.
Talk to us about licensing and market entry into Australia.
