Macquarie Bank Ascends to ‘Most Significant Financial Institutions’ Tier
Friday was a milestone moment for Macquarie Bank as the Australian Prudential Regulation Authority (APRA) designated it as one of the ‘Most Significant Financial Institutions’ (MSFI). This move is far from a simple regulatory adjustment – it signifies Macquarie Bank’s impending full-fledged membership in the Australian banking cartel. Sooner or later, through fair means or foul, Macquarie Bank is set to be recognised as a key player in the Australian banking sector.
APRA’s Commitment to Small and Medium-sized Banks
This decision emerged from the Council of Financial Regulators’ Review into Small and Medium-sized Banks. In this review, APRA pledged to formalise a three-tiered approach to proportionality in the banking prudential framework. This approach aims to better support competition from small and medium banks and promote a fairer banking landscape in Australia.
The MSFI category, announced on Friday, represents APRA’s first significant stride towards achieving these objectives. The four major banks, along with Macquarie Bank, will now be grouped as ‘Most Significant Financial Institutions’ under APRA’s proposed recalibration of its current two-tiered prudential framework.
A New Three-Tiered Approach
APRA has released a discussion paper that consults on formalising this three-tiered approach. Under the existing framework, banks are classified as either significant or non-significant financial institutions. Those designated as significant face additional or heightened requirements in certain areas compared to their non-significant counterparts.
In its discussion paper, APRA proposed a new tier – the Most Significant Financial Institutions – for banks with over $300 billion in assets. This group would include the four major banks and Macquarie Bank, which currently has $316 billion in assets as at October 2025.
Based on APRA’s monthly banking statistics, these five largest banks account for 78 per cent of system household deposits and 80 per cent of bank-funded mortgages. This dominance in the market underscores their significant role in the Australian banking sector.
Other Tiers and Transition Periods
The second tier would encompass all other banks that are considered Significant Financial Institutions, though the threshold for this designation would be raised from $20 billion to $30 billion. This second tier would include ING, Bendigo and Adelaide Bank, Bank of Queensland, and HSBC.
The third tier, comprising non-Significant Financial Institutions, would include all remaining banks. Four entities currently classified as Significant Financial Institutions – Rabobank, AMP, People First Bank, and NGM Group – would be relegated to this lowest tier under APRA’s proposal.
APRA noted that non-Significant Financial Institutions would be granted additional time to comply with new or revised requirements, where appropriate, compared to banks in the other tiers. APRA also acknowledged that banks may move between tiers over time due to growth or mergers and acquisitions. Therefore, it proposes to provide all banks with a transition period of at least 12 months to comply with higher prudential settings should they ascend to a higher tier.
This new three-tiered approach to proportionality in the banking prudential framework represents a significant step towards promoting competition and fairness in the Australian banking sector. With Macquarie Bank now stepping into the Most Significant Financial Institutions tier, the face of the Australian banking cartel is set to change.
For more information on APRA’s designation of Macquarie Bank as a ‘Most Significant Financial Institution’, click Here.
