{"id":"F2018L01253","name":"Banking exemption No. 2 of 2018","slug":"banking-exemption-no-2-of-2018","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":97929,"registerId":"commonwealth-F2018L01253-current","compilationNumber":null,"startDate":"2026-04-02","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Banking exemption No. 2 of 2018","content":"![](image.001.png)\n\nBanking exemption No. 2 of 2018\n\nBanking Act 1959\n\nI, Pat Brennan, a delegate of APRA:\n\n(a) under subsection 11(4) of the Banking Act 1959 (the Act), REVOKE Banking exemption No. 1 of 2015 made on 18 March 2015;\n\n(b) under subsection 11(1) of the Act, DETERMINE that section 8 of the Act does not apply to a registered entity that complies with the conditions specified in the attached Schedule.\n\n    This instrument takes effect upon registration on the Federal Register of Legislation.\n\nDated: 31 August 2018\n\n\\[Signed\\]\n\nPat Brennan\n\nExecutive General Manager\n\nAPRA\n\nInterpretation\n\nIn this Notice\n\n> APRA means the Australian Prudential Regulation Authority.\n\n> Note 1 This determination is a legislative instrument (see subsection 11(6) of the Act).\n\n> Note 2 Under subsection 8(1) of the Act, a body corporate is guilty of an offence if it carries on any banking business in Australia, the body corporate is not the Reserve Bank or an authorised deposit-taking institution and there is no determination in force under section 11 of the Act that subsection 8(1) does not apply to the body corporate. The maximum penalty is 200 penalty units. By virtue of subsection 8(2) of the Act, an offence against subsection 8(1) is an indictable offence. Under subsection 8(3) of the Act, if a body corporate commits an offence against subsection 8(1), the person is guilty of an offence against that subsection in respect of the first day on which the offence is committed and each subsequent day (if any) on which the circumstances that gave rise to the body corporate committing the offence continue (including the day of conviction for any such offence or any later day).\n\n> Note 3 Under subsection 11(1) of the Act, APRA may, in writing, determine that any or all of the provisions of the Act referred to in paragraphs 11(1)(a) to (e) do not apply to a person while the determination is in force.\n\n> Note 4 Under subsection 11(2) of the Act, a determination under subsection 11(1) may be expressed to apply to a particular person or to a class of persons, may specify the period during which the determination remains in force and may be made subject to conditions.\n\n> Note 5 Under subsection 11(4) of the Act, APRA may, in writing, vary or revoke a determination made under section 11.\n\n  \n\nSchedule of conditions\n\nRestriction on issuing at-call products\n\n    Where a registered entity offers, issues or sells a debenture to a retail investor:\n\n    (a) the debenture must have a maturity period of at least 31 days; and\n\n    (b) subject to Condition 3, the retail investor must not be able to redeem any funds for 31 days from the date they are invested in the debenture.\n\nRollover and repayment on maturity of debentures\n\n2. When a debenture that is issued or sold by a registered entity to a retail investor reaches maturity, the registered entity must:\n\n(a) roll over the retail investor’s funds into another debenture with a maturity period of at least 31 days; or\n\n(b) if the retail investor requests that the investment not be rolled over into another debenture, repay the retail investor’s funds in the form of cash, cheque or direct credit to an account held at an ADI.\n\nEarly release of funds\n\n    3. A registered entity may, upon written request from a retail investor at any time, pay to the investor some or all of the funds invested in a debenture, provided that the registered entity is satisfied that the investor has demonstrated that he or she is subject to exceptional circumstances that may lead to hardship and that it is appropriate to release the funds.\n\n    4. A registered entity may only release funds under Condition 3 if the release complies with a written procedure prepared by the registered entity. The procedure must set out the basis upon which the registered entity will determine whether exceptional circumstances that may lead to hardship exist that would warrant the early release of funds.\n\nProhibition on use of certain transaction facilities\n\n    5. A registered entity must not offer the following facilities to retail investors in relation to an investment product:\n\n(a) Automatic Teller Machine (ATM) facilities;\n\n(b) BPAY facilities offered by BPAY Pty Limited ACN 079 137 518;\n\n(c) Electronic Funds Transfer at Point of Sale (EFTPOS) facilities; or\n\n(d) cheque account facilities.\n\nRestriction on use of certain words and expressions\n\n6. A registered entity must not use or assume the words or expressions deposit or at-call, or any other word or expression (whether or not in English) of like import, in relation to an investment product offered, issued or sold to a retail investor.\n\n7. A reference to a word or expression being used or assumed includes a reference to the word or expression being used or assumed:\n\n(a) as part of another word or expression; or\n\n(b) in combination with other words, letters or other symbols.\n\nObligation to give a warning where a registered entity offers securities and must make disclosure under Part 6D.2 of the Corporations Act\n\n8. Where:\n\n(a) a registered entity takes money on deposit by offering, and issuing or selling, securities; and\n\n(b) the offer of the securities needs disclosure to the investor under Part 6D.2 of the Corporations Act,\n\na prudential supervision warning must be clearly and prominently set out in each disclosure document relating to the securities.\n\nObligation to give a warning where a registered entity issues or sells a financial product and must make disclosure under Part 7.9 of the Corporations Act\n\n9. Where:\n\n(a) a registered entity takes money on deposit by issuing or selling a financial product; and\n\n(b) the issue or sale of the financial product requires a Product Disclosure Statement to be or to have been given to the investor under Part 7.9 of the Corporations Act,\n\na prudential supervision warning must be clearly and prominently set out in the Product Disclosure Statement.\n\nObligation to give a warning in other cases\n\n10. Where a registered entity takes money on deposit in circumstances that are not covered by Conditions 8 or 9, a prudential supervision warning must be given to the investor in the following manner:\n\n(a) if, before the investment product is issued or sold to the investor, information relating to the investment product is given to the investor in one or more paper documents (whether or not such information is also given to the investor in another form) – the warning must be clearly and prominently set out in those documents;\n\n(b) if, before the investment product is issued or sold to the investor, information relating to the investment product is given to the investor in one or more electronic communications (whether or not such information is also given to the investor in another form) – the warning must be clearly and prominently set out in those electronic communications; or\n\n(c) in any other case – the warning must be clearly and prominently set out in a paper document or electronic communication that is given to the investor before the investment product is issued or sold to the investor.\n\nExceptions to the obligation to give a warning\n\n11. Despite Conditions 8 to 10, a prudential supervision warning does not have to be given in any of the following circumstances:\n\n(a) where the investor is a related body corporate of the registered entity;\n\n(b) where the registered entity believes, on reasonable grounds, that the investor is a professional investor;\n\n(c) where the registered entity believes, on reasonable grounds, that the investment product is provided for use in connection with a business that is not a small business;\n\n(d) where the registered entity believes, on reasonable grounds, that the investment product is issued or sold to an investor who already holds an investment product of the same kind;\n\n(e) where the investment product is issued or sold by an exempt public authority;\n\n(f) where the investment product is not issued or sold in the course of carrying on a business of issuing or selling investment products;\n\n(g) if the investment product is not an option – where no consideration is provided for the issue or sale of the investment product;\n\n(h) if the investment product is an option – where:\n\n(i) no consideration is provided for the option; and\n\n(ii) no consideration is provided for the underlying rights or interests on the exercise of the option;\n\n(i) where the registered entity believes, on reasonable grounds, that the following conditions are satisfied:\n\n(i) the investor has previously been given a paper document or electronic communication before 1 January 2016, containing a statement that:\n\n    (A) the registered entity is not authorised under the Banking Act and is not supervised by APRA; and\n\n    (B) an investment in a particular kind of investment product, or in all investment products, issued or sold by the registered entity will not be covered by the depositor protection provisions in section 13A of the Banking Act; or\n\n    (ii) the investor has previously been given a paper document or\n    electronic communication on or after 1 January 2016, containing a statement that:\n\n    (A) the registered entity is not authorised under the Banking Act and is not supervised by APRA;\n\n    (B) an investment in a particular kind of investment product, or in all investment products, issued or sold by the registered entity will not be covered by the depositor protection provisions in section 13A of the Banking Act; and\n\n    (C) an investment in a particular kind of investment product, or in all investment products, issued or sold by the registered entity will not be covered by the financial claims scheme established under Division 2AA of the Banking Act;\n\n(iii) the statement was displayed clearly and prominently so as to make it reasonably likely to be read by the investor;\n\n(iv) since being given the statement the investor has not received any information from the registered entity or a representative of the registered entity suggesting that the warning is no longer operative; and\n\n(v) the investment product meets the description of the investment products that, according to the statement, will not be covered by the depositor protection provisions in section 13A of the Banking Act;\n\n(j) where APRA tells the registered entity, in writing, that APRA is satisfied that the protection of investors’ interests does not require a prudential supervision warning to be given:\n\n(i) to the investor;\n\n(ii) to a specified class of investors to which the investor belongs;\n\n(iii) in respect of the investment product; or\n\n(i) in respect of a specified class of investment products to which the investment product belongs.\n\nPrudential supervision warning\n\n    12. For documents, electronic communications or other material described in Conditions 8 to 10, a prudential supervision warning is a statement that:\n\n    (a) the registered entity is not authorised under the Banking Act and is not supervised by APRA;\n\n    (b) the investment will not be covered by the depositor protection provisions in section 13A of the Banking Act; and\n\n    (c) the investment will not be covered by the financial claims scheme established under Division 2AA of the Banking Act.\n\nDefinitions\n\n13. In this Schedule:\n\nADI has the meaning given in section 5 of the Banking Act 1959.\n\nAPRA means the Australian Prudential Regulation Authority.\n\nat-call product means a debenture payable on demand or up to and including 30 days from when a retail investor makes an investment in a retail product.\n\nauthorised representative has the meaning given in section 761A of the Corporations Act.\n\nBanking Act means the Banking Act 1959.\n\nCorporations Act means the Corporations Act 2001.\n\ndebenture has the meaning given in section 9 of the Corporations Act.\n\ndisclosure document has the meaning given in Part 6D.2 of the Corporations Act.\n\nexempt public authority has the meaning given in section 9 of the Corporations Act\n\nfinancial product has the meaning given in Division 3 of Part 7.1 of the Corporations Act, but does not include securities.\n\ngiven, in paragraphs (a), (b) and (c) of Condition 10 and subparagraph (i)(i) of Condition 11, means given or sent in a way that would satisfy the requirements of section 1015C of the Corporations Act if the paper documents or electronic communications mentioned in those paragraphs or that subparagraph were Statements to which that section applies.\n\ninvestment product means:\n\n    (a) securities; or\n    (b) a financial product; or\n    (c) any other arrangement;\n\nthat involves the taking of money on deposit.\n\ninvestor means the person to whom an investment product is issued or sold.\n\nissue:\n\n(a) in relation to securities – has the same meaning as in Part 6D.2 of the Corporations Act; and\n\n(b) in relation to any other investment product – has the same meaning as in Part 7.9 of the Corporations Act.\n\noffer has the meaning given in Part 6D.2 of the Corporations Act.\n\nProduct Disclosure Statement has the meaning given in section 761A of the Corporations Act.\n\nprofessional investor has the meaning given in section 9 of the Corporations Act.\n\nprudential supervision warning has the meaning in Condition 12.\n\nregistered entity means:\n\n    (a) a corporation whose name is entered in the Register of Entities kept by APRA under section 8 of the Financial Sector (Collection of Data) Act 2001; or\n    (b) a corporation that meets the definition of ‘registrable corporation’ in section 7 of the Financial Sector (Collection of Data) Act 2001 as it existed immediately prior to amendment by the Treasury Laws Amendment (Banking Measures No. 1) Act 2018.\n\nretail investor means a person who would be a retail client under section 761G of the Corporations Act 2001.\n\nretail product means an investment product offered, issued or sold to a retail investor.\n\nrepresentative, in relation to a registered entity, means:\n\n(a) an authorised representative of the entity; or\n\n(b) an employee or director of the entity; or\n\n(c) an employee or director of a related body corporate of the entity; or\n\n(d) any other person acting on behalf of the entity.\n\n  \n\nsale:\n\n(a) in relation to securities – has the same meaning as in Part 6D.2 of the Corporations Act; and\n\n(b) in relation to any other investment product – has the same meaning as in Part 7.9 of the Corporations Act.\n\nsecurities has the same meaning as in Part 6D.2 of the Corporations Act.\n\nsmall business has the meaning given in subsection 761G(12) of the Corporations Act.\n\nWhether a body corporate is related to another body corporate for the purposes of paragraph (a) of Condition 11 is to be determined in the same way as under the Corporations Act.\n\nA reference to an Act or provision of an Act is a reference to that Act or provision as in force from time to time.","sortOrder":0}],"analysis":{"kimi_summary":{"content_quality":"ok","complexity_score":6,"scope_assessment":{"changed":false,"description":"This instrument maintains the established scope of the Banking Act exemption framework. It replaces an earlier 2015 exemption with substantively similar conditions, updating references to legislation and refining the warning requirements. The core purpose — permitting registered non-ADI entities to take retail deposits subject to consumer safeguards — remains unchanged from the original 2015 instrument and the broader section 11 exemption power."},"complexity_factors":["Extensive cross-referencing to the Corporations Act 2001 (at least 15 external references to sections, Parts, and definitions)","Nested conditional logic in Conditions 8-11 with multiple overlapping exceptions to the warning requirements","Dual-track definitions where terms like 'issue', 'sale', and 'given' have different meanings depending on whether securities or financial products are involved","Temporal condition in Condition 11(i) distinguishing between pre- and post-1 January 2016 documents with different required statements","13 defined terms in the Definitions section, several of which incorporate external statutory definitions by reference","Exception-within-exception structure in Condition 11 (10 separate exemption circumstances, some with sub-conditions)","Ambiguous numbering in Condition 11(j) which lists sub-paragraphs (i), (ii), (iii), (iv) then jumps to (i) again — suggesting drafting error or confusion"],"plain_english_summary":"This exemption lets certain registered non-bank finance companies legally take money from ordinary Australian investors without becoming full banks, provided they meet strict consumer-protection rules. It affects finance companies seeking retail funding and everyday investors who must receive clear written warnings that these firms are not banks, not APRA‑supervised, and deposits aren’t covered by the government guarantee. The aim is a regulated middle ground that prevents consumer confusion and limits bank‑like access to funds."},"flash_summary":{"complexity_score":6,"scope_assessment":{"changed":false,"description":"This instrument replaces Banking exemption No. 1 of 2015 and continues the same statutory technique: it permits specified registered entities to avoid the s 8 criminal prohibition while complying with a set of conditions. The core scope — allowing non-ADI registrants to take retail funds in limited forms subject to liquidity and disclosure constraints — remains the same as the exemption regime’s original purpose. The changes appear to be an updated or refined set of conditions (definitions, 31‑day minimum, explicit prohibitions on transaction facilities, and detailed warning exceptions), not a material expansion of the exemption’s policy scope."},"complexity_factors":["Revocation and replacement of prior instrument (cross-temporal change)","Extensive cross-references to multiple provisions of the Corporations Act and Banking Act (e.g. Part 6D.2, Part 7.9, s13A, Division 2AA, s761G)","About 20 defined terms in the Schedule’s Definitions section","Nested and conditional exceptions (Condition 11 contains multiple sub-conditions and a multi-part prior-warning exception with several criteria)","Discretionary judgments required of registrants (e.g. \"reasonable grounds\" for professional investor, \"exceptional circumstances\" for early release)","Multiple interaction points with disclosure regimes (different rules for disclosure documents, Product Disclosure Statements, electronic communications)","Operational requirements (written hardship-release procedure, controls to prevent offering prohibited facilities)","Subjective APRA powers to waive warning requirements in writing (Condition 11(j))","Different modes of delivery and timing requirements for warnings (Conditions 8–10 reference paper vs electronic communications and Corporations Act section 1015C)"],"plain_english_summary":"**What this instrument does, in plain terms**\n\n- APRA (the Australian Prudential Regulation Authority) has used its power under the Banking Act to say that certain registered corporations are not subject to the criminal prohibition in section 8 of the Banking Act (which normally makes it an offence for a corporation to carry on banking business unless it is an ADI or the Reserve Bank) — but only while those corporations meet a set of conditions in the attached Schedule. (See the opening determination and the Schedule.)\n\n- Mechanically, the Notice revokes an earlier exemption (Banking exemption No. 1 of 2015) and replaces it with this set of conditions. A registered entity that complies with the Schedule may lawfully take money on deposit in specified forms (mainly debentures) from retail investors without being prosecuted under s 8. (See the Instrument and the Schedule.)\n\n**Who is affected**\n\n- Registered entities as defined in the Schedule (corporations on APRA’s Register of Entities, or corporates meeting the previous definition of registrable corporation). These entities gain a limited safe harbour from the s 8 prohibition if they follow the conditions.\n- Retail investors (defined as people who would be retail clients under the Corporations Act) who buy the investment products offered by those registered entities.\n- Authorised deposit-taking institutions (ADIs) and payment-service providers indirectly, because the instrument restricts access to payment facilities and sets repayment requirements.\n\n**Key requirements and limits you need to know**\n\n- Minimum term and no at-call access for debentures sold to retail investors: any debenture to a retail investor must have at least a 31-day maturity and the investor must not be able to redeem within those 31 days (Condition 1).\n\n- What happens at maturity: on maturity the entity must either roll the investor’s funds into another debenture with a minimum 31-day term, or (if the investor asks) repay the investor in cash, cheque or by direct credit to an account held at an ADI (Condition 2).\n\n- Early release only for hardship: the entity may release funds early only upon written request and only if the investor shows “exceptional circumstances” likely to lead to hardship, and only in accordance with a written procedure the entity must prepare (Conditions 3–4).\n\n- No usual bank transaction facilities: a registered entity must not offer ATM, BPAY, EFTPOS or cheque-account facilities in relation to the investment product (Condition 5).\n\n- Marketing and naming limits: the entity must not use the words “deposit” or “at-call” (or equivalents) in relation to the investment product (Conditions 6–7).\n\n- Mandatory consumer warnings: in any disclosure documents or product disclosure statements where Corporations Act disclosure rules apply, the entity must include a clear “prudential supervision warning” saying the entity is not authorised under the Banking Act, is not supervised by APRA, and the investment is not covered by depositor protection (s 13A) or the Financial Claims Scheme (Division 2AA) (Conditions 8–12).\n\n- Exceptions to the warning requirement: there are a number of specific exceptions where the warning need not be given — for example, related bodies corporate, professional investors, business-use (non-small business) investors, investors who previously received an appropriate warning, or where APRA in writing waives the warning necessity for specified investors or products (Condition 11).\n\n**Why this matters (claimed purpose and practical effect)**\n\n- Claimed purpose: the Notice allows certain non-ADI registered entities to take funds from retail investors in the form of debentures while imposing limits intended to preserve some of the features that differentiate banking from other fundraising (limited liquidity, no payment-system facilities, clear warnings that the entity is not an ADI and is not covered by deposit protection schemes). The instrument itself describes this as a determination under s 11 of the Banking Act.\n\n- Practical effect on behaviour and markets:\n  - Entities that want to raise money from retail clients can do so without becoming an ADI, provided they accept restrictions on liquidity, payment access and naming. (See Conditions 1, 5–7.)\n  - Retail investors give up immediate access to invested funds for at least 31 days and face the risk that the issuing entity is not covered by deposit protection; they are meant to be informed of those facts via mandatory warnings. (See Conditions 1, 2, 8–12.)\n  - The instrument reduces the ability of such entities to offer bank-like transactional services, which preserves a regulatory distinction between ADIs and non-ADIs in the payments and deposit insurance space. (See Condition 5 and Condition 12.)\n\n**Costs, incentives, trade-offs and implementation burdens**\n\n- Who pays and who benefits: registered entities benefit because they can raise retail money without ADI licensing; retail investors bear liquidity risk and the residual counterparty risk of the issuer (Conditions 1–4, 12). The benefits are concentrated (issuers), while the costs are dispersed across retail purchasers.\n\n- Compliance and operational costs for issuers: entities must prepare written hardship-release procedures, ensure product terms and marketing avoid restricted words, add the prescribed warnings to disclosure documents or assume the risk of establishing an exception, and implement controls to prevent offering prohibited transaction facilities (Conditions 3–7, 8–12). These are ongoing governance and record-keeping costs.\n\n- Discretion and judgement calls: the instrument leaves subjective judgements to entities and APRA — e.g. whether an investor is a professional investor or small business for warning exceptions, whether an investor has demonstrated “exceptional circumstances” for early release, and whether APRA will exercise its power to exempt certain warnings in writing (Condition 3, Condition 11(j)). These create compliance risk and possible disputes.\n\n- Market effects and substitution risks: the 31‑day minimum and prohibition on payment facilities push investors away from instantly-accessible deposit substitutes and toward longer-dated retail debt products or ADI accounts. That changes liquidity profiles in the retail funding market and could affect pricing and competition for short-term retail savings.\n\n- Risk of evasion or re‑engineering: firms may try to redesign products or contractual arrangements to avoid the label or the definition of “investment product” (Definitions, Conditions 6 and 13). Monitoring and enforcement by APRA (and possibly ASIC/FCA-related actors) will determine how effective the constraints are.\n\n**Concrete legal hooks in the instrument**\n\n- The exemption operates under subsection 11(1) of the Banking Act and is limited by the Schedule of conditions. The criminal prohibition being circumvented is subsection 8(1) (see Notes and opening paragraphs).\n- Key limits are in Condition 1 (31‑day minimum), Condition 5 (no ATM/BPAY/EFTPOS/cheque facilities), Conditions 6–7 (prohibition on certain words), Conditions 8–12 (warning obligations and exceptions), and Conditions 3–4 (hardship-release procedure).\n\nOverall, this instrument creates a regulated pathway for certain registered non-ADIs to take retail money in debenture form while restricting liquidity, payment functionality and marketing to preserve the distinction from ADIs and to inform investors of the absence of deposit protections. The main trade-offs are increased access for issuers versus reduced liquidity and disclosure-reliant protection for retail investors, plus administrative and compliance burdens on issuing entities."},"flash_summary_failed":{"failed":true,"reason":"Unauthenticated. Configure AI_GATEWAY_API_KEY or use a provider module. Learn more: https://ai-sdk.dev/unauthenticated-ai-gateway","source":"analysis-cron"}},"importantCases":[],"_links":{"self":"/api/acts/banking-exemption-no-2-of-2018","history":"/api/acts/banking-exemption-no-2-of-2018/history","analysis":"/api/acts/banking-exemption-no-2-of-2018/analysis","conflicts":"/api/acts/banking-exemption-no-2-of-2018/conflicts","importantCases":"/api/acts/banking-exemption-no-2-of-2018/important-cases","documents":"/api/acts/banking-exemption-no-2-of-2018/documents"}}