Middle East banks turn to Australia
Judge: The Australian Prudential Regulation Authority will assess licence bids from overseas. Photo: Patrick Cummins
MIDDLE Eastern and Asian banks are eyeing an entry into the Australian market, with several believed to have started in recent months the long process of securing a banking licence.
The move should fill a financing gap caused by some stressed European lenders scaling back their exposure to Australia.
Towards the end of last year, European groups pulled $16.7 billion from the local economy as they began feeling the funding squeeze in their home markets.
The shortfall this caused has generally been met by Asian banks.
Banking industry sources have named several overseas players as taking initial steps to secure an Australian banking licence. They include commercial Taiwanese lender Cathay United Bank and Middle Eastern commercial major Qatar National Bank.
Saudi Arabian Islamic banking specialist Al Baraka has also been named as eyeing a foothold, suggesting the federal government's efforts in promoting Australia's involvement in Islamic financing are gaining traction. Given the time and capital involved, not all banks see the licence process through, particularly as their commercial goals can quickly change.
None of the banks named responded to requests for interviews. A spokesman for the Australian Prudential Regulation Authority (APRA) declined to comment, citing a policy that prevents it discussing specific licence applications.
In Australia, the rules on operating as a bank or an authorised deposit-taking institution have been designed to protect deposits.
Over the past two years just six new banking licences have been issued to overseas players. Most are Asian or Middle Eastern banks, including two of China's biggest: Bank of Communications and China Construction Bank. Other entrants include Beirut Hellenic Bank and Taiwan Cooperative Bank. Over the same period three banks have handed back their Australian licences: Allied Irish, Canada's Toronto-Dominion and Bank of Cyprus, which sold its Australian business to Bendigo Bank. (The Bank of Cyprus franchise continues to trade under the same name, although Bendigo is considering a rebranding.)
APRA has a reputation as one of the more conservative regulators, which means it can take years for an international bank to secure a licence.
To operate in Australia, banks need a minimum of $50 million in so-called tier-1 capital, although this changes according to the level and type of loans on the balance sheet.
APRA polices aggressively the use of the word ''bank'', launching several legal actions in recent years to either shut down operations or freeze funds.
Of the 65 lenders operating under a full banking licence in Australia, about two-thirds are overseas players.