APRA Explains: Applying to APRA to use restricted words

Banks hold an important and trusted role in the community and it is important that the general public has confidence about whether or not they are dealing with an authorised bank. As such, an important – but sometimes misunderstood – part of APRA’s role in supervising the banking industry is to restrict the use of certain words and expressions related to banking. These words include bank, banker and banking, but also extend to similar words or expressions, even if they are not in English, such as banc or banq.

Under the Banking Act 1959, APRA must give consent before a financial business (other than a licensed bank) can use a restricted word or expression. Gaining APRA’s consent to use a restricted word/expression is not a simple, tick-the box exercise, but a serious and sometimes lengthy process.

When considering applications to use a restricted word/expression, APRA’s starting point is that a financial business using a restricted word is likely to mislead the general public that the business is a bank. APRA will therefore refuse to allow a financial business to use a restricted word or expression, unless the financial business can show the existence of very rare and unusual circumstances that would warrant APRA granting consent.

Do the restrictions apply to my business?

Due to a statutory exception, APRA authorised deposit-taking institutions (‘ADIs’) are allowed to use restricted words and expressions without written permission from APRA, unless APRA determines that they may not.

If your business is not an ADI, you must apply to APRA for consent to use a restricted word/expression. Applications to APRA to use a restricted word/expression are governed by sections 66 and 66A of the Banking Act 1959. When considering applications, APRA applies two tests:

1. Is the business a financial business? AND
2. Do ‘rare and unusual circumstances’ apply?

1. Is my business a financial business?

In keeping with the intention of not misleading the public, restrictions on words/expressions apply to financial businesses. However, the definition of financial business is broad and includes not only a business that provides financial services, but also a business that relates to the provision of the financial services.  APRA’s Guidelines on the use of Restricted Words under the Banking Act (‘the Guidelines’) include examples of the type of services that APRA considers to be a ‘financial service’.

Non-financial businesses, that is, businesses that don’t provide financial services or services that relate to financial services (for example, restaurants, hairdressers, bakeries) do not require consent from APRA. However, other government agencies – such as ASIC – will often prevent a business from using a restricted word unless they provide written confirmation from APRA that it doesn’t object to the use of the term. As such, non-financial businesses often need to contact APRA prior to using a restricted word.

2. Do rare and unusual circumstances apply?

APRA will only grant consent if it deems that very rare and unusual circumstances apply. There is no prescribed definition of such circumstances. An applicant must demonstrate to APRA that their proposed use of the restricted words/expression includes rare and unusual circumstances which would warrant APRA granting a consent or exemption. The rare and unusual circumstances must outweigh the community safeguard for which the restriction is in place. In the past, APRA has considered circumstances including whether the business could operate under an alternative name.

How long will it take for APRA to assess my application?

The time APRA takes to respond to a request for consent depends on the nature of the business that is making the application.

Non-financial businesses

APRA generally takes five business days to provide a response to a business that is considered to be non-financial.

Financial businesses

APRA may take up to 60 business days to assess applications made by a financial business, subject to the complexity of the circumstances of the applicant.

The assessment of an application from a financial business may require a significant amount of time where the decision is not immediately clear.  APRA must assess the facts of the application, determine that the business is a financial business and assess the merits of any ‘rare and unusual circumstances’ provided by the applicant. APRA’s decision is made by a senior APRA staff member who must decide whether to grant consent, refuse consent or grant consent with conditions.

Tips for applying to APRA to use a restricted word/expression

• The Guidelines are an important source of information for any business wishing to make an application to APRA for the use of a restricted word. Make sure to read them thoroughly before applying to APRA to use a restricted word/expression.
• Provide all relevant information set out in the Guidelines, making sure to demonstrate any ‘rare and unusual circumstances’ that would warrant APRA granting your business consent to use a restricted word/expression.
• A business must wait for the outcome of APRA’s decision before it can use a restricted word. Therefore you should carefully consider when you wish to commence business and how long APRA my take to respond to your request.

Case Study

Mary runs a mortgage broking business and has decided to change the name of her business to “Bank Beaters”. Mary applies to APRA for consent to use the business name “Bank Beaters”, which includes the restricted word ‘bank’. In her application, Mary states that her business would appeal to more customers if she could use the restricted term.

APRA considers that a mortgage broking business relates to the provision of financial services, as it is a business that relates to the provision of borrowing, lending and other transactions in which the subject of the transaction is finance. APRA therefore considers Mary’s business to be a ‘financial business’ which requires APRA’s consent to use a restricted word.

However, the reasons that Mary provides for wanting to use the restricted term – that her business would appeal to more customers if she were granted consent to use the word – is not considered to be a ‘rare and unusual circumstance’. So APRA refuses to allow Mary to use the restricted word, and she is unable to change the name of her business to Bank Beaters.