An ADI is a financial institution licensed by the Australian Prudential Regulation Authority (APRA) to conduct a banking business in Australia including accepting deposits and making advances of money.
Banks, credit unions and building societies are all examples of ADIs in Australia. By law, these financial institutions must hold an ADI licence to accept deposits.
While all banks must be ADIs licensed by APRA, not all financial institutions need to be. For example, finance companies (which are non-ADI financial institutions) can offer loans, but they cannot accept deposits, and their primary regulator is the Australian Securities and Investments Commission.
Key points covered
- Types of ADIs
- ADIs vs banks
- FCS protection and regulations
Types of ADIs
There are a few main types of ADIs you’ll find in Australia like
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Banks: These include big banks like Commonwealth Bank, Westpac, ANZ and NAB. They offer a full range of financial services such as savings accounts, loans, and credit cards, with physical branches in many towns and cities in Australia. There are also smaller banks known as neobanks, challenger banks or digital banks, which may be online-only banks with no physical branches offering a narrower set of financial products or services. Some of these may operate under a more restricted ADI licence.
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Credit unions and building societies: These are smaller, community-focused institutions that are customer or member-owned. This structure, along with typically lower operating costs, allows them to offer similar products to banks but often with lower fees and higher interest rates.
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Foreign banks: These are international banks that operate in Australia, either through an Australian subsidiary licensed by APRA (which can deal with Australian retail and wholesale clients) or an Australian branch (which is regulated by the foreign bank’s home regulator but can only deal with Australian wholesale clients).
ADIs vs banks
While all banks are ADIs, not all ADIs call themselves banks (although many do). Credit unions and building societies are customer or member-owned rather than shareholder-owned ADIs, but many now use the word “bank” in their names because they offer a similar range of financial products and services to more traditional banks.
Some of the larger banks or banking groups may offer a wider range of financial products and services, such as complex loans, foreign exchange services, or a variety of investment options. They may also offer higher-tech services, like advanced mobile apps and online tools for managing finances, which may be less common or simpler at financial institutions like credit unions and building societies.
Should you always bank with an ADI?
When it comes to term deposits or savings accounts, only ADIs are legally allowed to offer these types of accounts. However, for various loans and other financing services, you don’t necessarily have to use an ADI, as non-ADIs (such as finance companies) can provide finance. A complete list of registered ADIs is available on the APRA website.
ADI regulations and Financial Claims Scheme (FCS) protection
ADIs in Australia are regulated by APRA. This oversight seeks to ensure these institutions maintain financial stability, meet strict standards, and are prepared to handle any potential operational risks.
One of the biggest benefits of banking with an ADI is that your deposit is protected under the FCS. This Australian Government-backed scheme is designed to protect deposits up to $250,000 per person, per ADI. So, if a bank, credit union or building society ever fails, your money should be safe up to that amount.
It’s worth mentioning that some ADIs operate under multiple brands. This means deposits with these brands are counted together for FCS protection purposes and this may impact a depositor’s total FCS coverage in the unlikely event that the FCS is activated. Visit APRA for more information on the FCS.
Important Information
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