Avenue Bank Secures Full APRA License Clearing the Provision of Bank Guarantees

Avenue Bank
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Australian Prudential Regulation Authority (APRA) has granted Avenue Bank an unrestricted banking license, making it the nation’s inaugural niche bank specializing in offering bank guarantees to small businesses and landlords.

“We are the first and only bank to specialize in bank guarantees, and we are optimistic about the product’s uptake this year,” said Avenue Bank CEO Peita Piper. APRA approved the license on Monday. Avenue Bank aims to tap into the $9 billion of deposits held as bank guarantees for commercial landlords’ tenants, with an average guarantee value of $125,000. By capturing just 2 percent of this $9 billion market, Avenue anticipates reaching its break-even point.

The bank plans to attract clientele away from major banks and secure business from prominent leasing agents like Colliers, CBRE, Knight Frank, and Ray White, as well as large commercial landlords such as Dexus, Mirvac, GPT, and Scentre Group. Additionally, Avenue aims to engage tenant advisors like Franklin Shanks and Kernel.

“The current bank guarantee procedures are burdensome, paper-intensive, and pose challenges for small businesses and landlords, often taking four to six weeks,” stated Ms. Piper. “We’ve streamlined the process digitally, capable of completing it within 24 hours with a five-minute application. And this is just the beginning of our innovations.” Within a year, Avenue intends to introduce a drawdown facility on its deposits, allowing tenants to access working capital.

Following the highly publicized failures of neobanks Volt and Xinja, which targeted retail deposits and lending, Avenue is the second new bank to receive full licensing from APRA. Alex Bank, a personal lender, secured an unrestricted license in December 2022. Avenue had been operating under a restricted authorized deposit-taking license granted in September 2021.

Ms. Piper highlighted that APRA raised its standards for new entrants following the collapses of Volt, Xinja, and several US lenders, including Silicon Valley Bank, last year. “It’s been an exhaustive and rigorous process,” she noted. “The requirements kept escalating. Our ability to navigate through the challenges of COVID, neobank failures, and the struggles in equity markets is a testament to our resilience.”

Avenue’s market opportunity stems from the practice of commercial landlords mandating tenants to provide nine to twelve months’ worth of rent as a bank guarantee, serving as a safety net in case of business failure or breaches of rental agreements.

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