Banking & Finance Law glossary
Banking and finance law in Australia is governed by a layered framework — the Banking Act 1959 (Cth), the National Consumer Credit Protection Act 2009 (Cth), the Personal Property Securities Act 2009 (Cth), and APRA prudential standards. This glossary covers 40 of the most commonly used terms.
This is a glossary of 40 key terms used in Australian banking and finance law. Each term has a plain-English definition and, where applicable, a reference to the underlying statute or regulatory instrument. Use it as a reference for transactional work and regulatory advice.
Definitions
ADI (Authorised Deposit-taking Institution)
An entity authorised by APRA under the Banking Act to carry on banking business in Australia — includes banks, building societies, and credit unions.
APRA
The Australian Prudential Regulation Authority, the prudential regulator of ADIs, insurers, and superannuation entities.
ASIC
The Australian Securities and Investments Commission, the conduct and disclosure regulator for financial services and credit.
Bank guarantee
An irrevocable undertaking by a bank to pay a specified sum to a beneficiary on demand — frequently used in leases and construction.
Banking business
The taking of deposits and making of advances of money. Only ADIs may carry on banking business in Australia.
Basel III
The international regulatory framework setting minimum capital, gearing, and liquidity requirements for banks. Implemented in Australia by APRA prudential standards.
Chattel mortgage
A security interest over goods where title passes to the lender until repayment. Now a security interest under the PPSA.
Circulating asset
An asset (for example, inventory, receivables) that a grantor may deal with in the ordinary course of business. Attracts specific PPSA rules.
Covenants
Contractual obligations in loan documents — may be affirmative, negative, or financial ratios. Breach typically triggers an event of default.
Credit licence
An Australian Credit Licence required to engage in credit activities under the NCCP Act.
Cross-default clause
A clause providing that a default under one facility triggers default under another — protects lenders against cascading credit deterioration.
Deed of priority
An agreement between secured creditors ranking their security interests. Often used where PPSA default rules do not reflect commercial agreement.
Event of default
A contractually defined event — typically non-payment, breach of covenant, or insolvency — that permits the lender to accelerate and enforce.
Facility agreement
The principal loan contract between lender and borrower setting out commitment, drawdown, interest, repayment, and covenants.
Financial services licence (AFSL)
A licence issued by ASIC authorising the holder to carry on a financial services business under the Corporations Act.
Floating charge
A pre-PPSA security over a class of assets that "floats" until crystallisation. Effectively replaced by the PPSA concept of security interest over circulating assets.
Guarantee
A contractual undertaking by a third party (guarantor) to answer for the debt, default, or miscarriage of another. Requires consideration and must be evidenced in writing in most states.
Hardship application
A borrower's request for a variation of credit contract terms on grounds of inability to meet obligations. Lenders have statutory obligations to consider.
Indemnity
A promise to hold the beneficiary harmless against loss — a primary obligation independent of any underlying debt, unlike a guarantee.
Intercreditor deed
An agreement between multiple creditors governing priority, enforcement, and sharing of proceeds. Critical in acquisition finance.
Letter of credit
A bank instrument providing conditional payment against documents — typically used in trade finance.
Margin lending
A facility allowing the borrower to borrow against marketable securities. Subject to specific NCCP provisions for retail clients.
National Credit Code
The code regulating consumer credit contracts, contained in Schedule 1 to the NCCP Act. Governs disclosure, hardship, default, and enforcement.
NCCP Act
The National Consumer Credit Protection Act 2009 (Cth) — the principal federal statute regulating consumer credit and credit-licensee conduct.
Negative pledge
A covenant restricting the borrower from granting security to other creditors without consent. Common in unsecured corporate lending.
Perfection
The steps taken under the PPSA to make a security interest effective against third parties — typically registration on the PPSR, possession, or control.
PPSA
The Personal Property Securities Act 2009 (Cth), the unified regime for security interests in personal property, regardless of form or nomenclature.
PPSR
The Personal Property Securities Register — the national electronic register for perfection of PPSA security interests.
Prudential standards
Binding standards issued by APRA setting minimum requirements for ADIs, insurers, and super entities — cover capital, liquidity, governance, and risk.
Purchase money security interest (PMSI)
A security interest taken by a seller or financier to secure the purchase price of the collateral. Enjoys super-priority under the PPSA if correctly perfected.
Responsible lending
The obligation on credit licensees to make reasonable enquiries and assess suitability before entering credit contracts with consumers.
Retention of title (ROT)
A contractual clause whereby a seller retains title to goods until paid. Now a security interest for PPSA purposes.
Security agreement
The agreement creating or providing for a security interest under the PPSA. Must satisfy attachment and enforceability requirements.
Security interest
An interest in personal property provided for by a transaction that in substance secures payment or performance — defined broadly under the PPSA.
Standby letter of credit
A letter of credit that pays only on default by the applicant — effectively a bank guarantee in trade form.
Subordination agreement
An agreement by which a creditor agrees to rank behind another creditor's claims. Commonly used between parent-company and bank debt.
Syndicated facility
A lending facility provided by a group of lenders (syndicate), typically with one lender acting as agent. Used for large corporate loans.
Term loan
A loan repayable by scheduled instalments over a fixed term — common for capital expenditure and acquisitions.
Unfair contract terms
Terms in consumer and small business contracts declared unfair under the ASIC Act and ACL — void and giving rise to remedies.
Variable interest rate
An interest rate that varies over the life of the loan by reference to a benchmark (for example, BBSW). Contrasted with fixed rate.
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These definitions are general explanations for educational purposes — not legal advice. Always verify against current legislation and case law before relying on them in a client matter.
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