APRA has written to foreign ADIs operating in Australia notifying them of its intention to require foreign ADIs to provide a written statement to a prospective depositor that clearly sets out that depositor protection provisions in the Banking Act do not apply.

APRA proposes that prior to the earlier of:
(i) the opening of an account;
(ii) the transfer of an account from another person; or
(iii) the taking of an initial deposit,
the foreign ADI must provide the person with a written disclosure statement which must be prominently displayed and clearly written in plain language.

The Statement must disclose, at a minimum, the following matters:

• The ADI is a foreign authorised deposit-taking institution (foreign ADI) and is not subject to the ‘depositor protection’ provisions contained in Part II, Division 2 of the Banking Act 1959 (Banking Act).
• The key depositor protections in the Banking Act which do not apply to foreign ADIs are as follows:
  – Deposits with a foreign ADI are not covered by the financial claims scheme and are not guaranteed by the Australian Government.
  – Deposits with a foreign ADI do not receive the benefit of statutory priority under subsection 13A(3) of the Banking Act.In summary, this means that in the event that a foreign ADI were to become unable to meet its obligations or suspends payment, the foreign ADI’s depositors in Australia would not receive priority payment from the foreign ADI’s assets in Australia.
  – A foreign ADI is not obliged to hold assets in Australia equal to or greater than its deposit liabilities in Australia.
  – APRA does not have power to appoint an ADI statutory manager to take control of a foreign ADI.
  – A foreign ADI is not obliged to immediately inform APRA if it considers that it is likely to become unable to meet its obligations, or that it is about to suspend payment.

APRA proposes that existing individual approvals for foreign ADIs would be revoked after a six-month transition period during which a foreign ADI would need to take steps to meet the proposed disclosure measures.

A foreign ADI may choose to adopt the statement as proposed by APRA or adopt its own wording, as long as it provides an equivalent or greater level of disclosure.