On 18 June 2025, APRA consulted on proposed minor amendments to instruments relating to section 66 of the Banking Act 1959 (the Act).1 On 17 September 2025, APRA published its response and flagged one outstanding policy issue relating to an exemption for foreign banks that issue debt securities in Australian wholesale capital markets.2 APRA planned to consider this issue further before finalising its position in 2026.
After further consideration, APRA is expanding the current exemption to include a broader set of foreign entities than initially proposed. Other aspects of the exemption remain unchanged.
Consultation background
Banking exemption No. 1 of 2018 – Foreign Bank Securities exempts foreign banks from section 66 of the Act when issuing debt securities in Australian wholesale capital markets.3 The exemption was first implemented in 1996 and was remade with some minor amendments in 2018.
The exemption has supported the development of Australian dollar capital markets by enhancing market liquidity and increasing supply. It has also reduced administrative burden by removing the need for exempt entities to apply individually to APRA for consent.
APRA’s 2025 consultation proposed expanding the exemption to include foreign bank holding companies and multilateral development banks. These changes would exempt additional entities that commonly seek and are granted consent to use restricted words on a case-by-case basis, reducing administrative burden for industry and APRA.
Consultation feedback
APRA received four submissions in response to its consultation, each of which was supportive of the proposal to broaden the exemption to capture more entities. Some respondents recommended APRA broaden the exemption further.
- Exempt entities – one submission recommended APRA include more types of foreign entities that can use restricted terms without an authorised deposit-taking institution (ADI) licence when issuing debt securities in Australian wholesale capital markets.
- Exempt activities – one submission recommended APRA broaden the types of activities that exempt entities could undertake in Australia while using restricted terms without an ADI licence.
APRA has carefully considered this feedback when finalising amendments to the exemption. This included considering whether these changes would be consistent with the consultation objectives and APRA’s risk appetite for foreign entities to use restricted words without an ADI licence when undertaking banking business in Australia.
Finalising the exemption
APRA has made a minor amendment to its proposal to incorporate submission feedback and better align with the consultation objectives. In addition to foreign banks, the list of exempt entities will also include:
- foreign bank holding companies;
- foreign bank treasury companies;
- multilateral development banks; and
- foreign subsidiaries of Australian banking groups.
Importantly, the final exemption retains the condition that these entities (or their parents or groups) must be prudentially regulated in their home country (excluding multilateral development banks). Foreign subsidiaries of Australian banking groups must have an Australian parent that is regulated by APRA.
Other foreign entities must individually seek APRA’s consent to be exempt from section 66 which will continue to be granted on a case-by-case basis.
APRA is not expanding the activities that exempt entities can undertake when using restricted terms without an ADI licence. It will continue to apply only to the issuance of wholesale debt securities in Australian wholesale capital markets. Expanding the exemption to other activities would significantly increase the risk that customers consider these entities are held to the same regulatory standards as other APRA-regulated banks given their use of restricted terms.
Attachment A provides further information on APRA’s rationale for this approach.
Next steps
The final legislative instrument containing the updated exemption is available on APRA’s website. It will come into effect in the coming weeks upon being registered on the Federal Register of Legislation.
Please email licensing@apra.gov.au if you have any questions relating to the updated exemption.
Yours sincerely,
Peter Kohlhagen
Executive Director Policy and Advice Division
Australian Prudential Regulation Authority
Attachment A – Overview of key policy issues raised in submissions
Policy issue 1: Exempt entities
APRA considered a broad range of suggested entities that could be included in the exemption. This included policy banks, specialised credit institutions, foreign bank treasury companies, foreign mutually owned entities, and foreign subsidiaries of Australian banking groups. APRA considered the risks associated with expanding the exemption to these entities, as well as the benefits they may provide to the Australian financial system.
After considering feedback, APRA is broadening its proposal to include bank treasury companies (whose parent or group is prudentially regulated in their home country) and foreign subsidiaries of Australian banking groups (whose parent is APRA-regulated). Foreign mutually owned entities that are prudentially regulated in their home country in the same way as banks will continue to be captured by the exemption.
APRA considers expanding the exemption to these entities is consistent with consultation objectives of reducing administrative burden for commonly exempt entities while also limiting the risks with allowing unlicenced entities to use restricted terms when conducting banking business in Australia. Importantly, these additional entities are required to either have parents or be in banking groups that are prudentially regulated in their home country, or that their parent is subject to APRA’s prudential framework (excluding multilateral development banks).
Foreign entities that are not captured by the exemption must still seek APRA’s consent to use the restricted terms. Applications will continue to be assessed on a case-by-case basis.
Policy issue 2: Exempt activities
APRA is not expanding the activities that exempt entities can undertake when using restricted terms without an ADI licence. While foreign entities can provide banking services to Australian firms, these entities cannot use restricted terms when marketing or soliciting customers, as per section 66 of the Act.
Allowing unregulated entities to use restricted terms to undertake a broad set of banking activities significantly increases the risk that customers may consider that these entities are held to the same regulatory standards as APRA-regulated ADIs.
APRA also considers that expanding the exempt activities would require subjecting the proposal to a separate and dedicated consultation process. This would provide opportunity for a broader set of stakeholders to provide feedback on how the policy change may impact them. For example, further changes to the exemption could be considered as part of any future reforms to prudential and licensing requirements for foreign banks that undertake banking business in Australia.