Little scrutinised deposit-taking entities, many of them run by Churches, will be subject to more restrictions - but no more scrutiny - under proposals
released on Friday by the Australian Prudential Regulation Authority.
More than 50 entities, with assets of more than A$7 billion, will be affected.
At present, these entities are exempt from the need to be authorised as deposit-taking institutions. These exemptions - which APRA said were "generally historical in nature" - cover some registered financial corporations and some religious charitable development funds.
The funds have, in most cases, also not produced product disclosure statements of the kind required of most debenture issuers by the Australian Securities and Investments Commission.
APRA said it proposes to restrict the use of certain terms by RFCs and Church funds, including the words "deposit" and "at-call". APRA will also require debenture offerings to have a minimum maturity of 31 days.
Church funds and other RFCs will not be able to provide "certain transaction facilities, including automatic teller machine access, BPay, Eftpos and cheque account facilities."
APRA said these changes were "intended to reduce the potential for retail investors to confuse debentures issued by RFCs with deposit products offered by ADIs."
The new requirements would take effect from July 1, 2013, APRA said, though existing retail debenture issues would be allowed a transition period of up to three years in which to become compliant.
Entities affected may include Hillsong CityCare, formerly Hillsong Emerge; ACS Financial (formerly Australian Christian Services), related to the Assemblies of God; Centenary Development Foundation, which on its website says it "operates as a ministry of Churches of Christ in Queensland" (and lends the funds raised to the Church); and the Catholic Development Fund.
The Catholic Development Fund (aligned with the Melbourne diocese) is one of the few that makes limited disclosure. It had assets of $1.1 billion in 2012. Most of $138 million in new lending last year was made to Church affiliates. According to its website, "the Fund continues to meet all requests for loans" at rates below bank rates.
Advertised interest rates for investors are also below market rates.