Regulator Opens Door to SME Growth Fund

11 December 2018

 The government-proposed fund for banks to inject equity into growing small businesses has received a boost, with the prudential regulator signalling it is willing to consider regulatory concessions to make the vehicle commercially viable.

At a roundtable hosted by Treasurer Josh Frydenberg in Canberra on Thursday, Reserve Bank of Australia governor Philip Lowe told commercial bankers and AustralianSuper that fixing a lack of funding to small and medium enterprises (SMEs) would be good for the economy.

To the welcome surprise of participants, Australian Prudential Regulation Authority deputy chair John Lonsdale signalled the traditionally conservative regulator may lower the regulatory capital requirements for the proposed Australian Business Growth Fund.

The APRA criteria included: there be only one such fund; a diversity of SMEs receive equity to avoid concentration risks; fund management is independent of its bank owners; it be open for new funding members to join; the funding source to be drawn from about five or six institutions; and contributions from individual banks be capped.