Financial entity

A financial entity is an entity other than an ADI that is one of the following:

• registered under the Financial Sector (Collection of Data) Act 2001
• a financial services licensee under the Corporations Act 2001 and meets certain conditions
• exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 and meets certain other conditions
• a securitisation vehicle.

Examples of financial entities include finance companies and securities dealers.

The rules for non-ADI entities are modified for financial entities in recognition that such entities are primarily engaged in lending as a business and have different requirements for debt funding. For example, for financial entities, the 1.5:1 safe harbour ratio applies to their non-lending business while their lending and certain other financial business is allowed much higher debt levels.

The safe harbour debt limit for financial entities that are non-ADI is 15:1 on a debt-equity basis.

Certain financial entities can elect to apply the ADI rules. For more information on this election, see Electing to use the ADI rules.