Treasury floats changes to banking, estate payment limits

Treasury is introducing several banking reforms as part of its deregulation agenda, including doubling the limit on payments permitted from deceased consumers' estates without probate or letters of administration.

The proposed changes include increasing the cap on banks' covered bond issuance to support access to stable and cost-effective sources of funding.

Treasury also wants to align the Financial Accountability Regime (FAR) reporting requirements for smaller banks with prudential regulation thresholds and increase the withdrawal limit for deceased persons' estate-related expenses from $15,000 to $30,000. This includes funeral expenses and would expressly provide for the payment of court filing fees from an account.

"These reforms will make it easier for mid-sized banks to compete and streamline reporting requirements for smaller banks to make the sector more efficient and dynamic," treasurer Jim Chalmers said.

"The increase to the covered bond cap will support greater access to stable and diversified funding sources for Australian banks. The Council of Financial Regulators' Review into Small and Medium-sized Banks found that a higher covered bond cap would particularly benefit mid-sized banks' access to longer-term and lower-cost funding."

Chalmers added that changes relating to deceased estates will help reduce administrative and financial burdens for families at a difficult time by making it easier to access funds to pay for funeral expenses, court filing fees and other costs relating to the management of the deceased estate.

After the consultation, Labor wants to implement the reforms from later this year.

The first part of the consultation relating to increasing the covered bond issuance limit under the draft Banking Regulations 2026, is taking submissions until October 30. The current limit is 8%. The proposed change for authorised deposit-taking institutions (ADIs) increases this to 12% of their assets.

The second consultation on implementing parts of the better regulation measures closes on November 30.

This proposal would increase the withdrawal limit to $30,000 from $15,000 and allow the payment of court filing fees when applying for probate of a deceased person's will and for letters of administration of a deceased person's estate.

As for the FAR, the enhanced notification threshold for ADIs would increase to $30 billion from $20 billion.

"The amending Rules align the enhanced notification threshold with the definition of Significant Financial Institution in Prudential Standard CPS 001 Defined terms to reduce notification obligations, and therefore administrative burden, for smaller ADIs, while preserving the regime's core accountability objectives," Treasury said.

Financial services minister Daniel Mulino said the reforms help boost productivity and competition in the financial sector.

"We are cutting red tape across the financial services industry by $780 million a year which is good for customers and good for the economy," he said.

"These reforms will make it easier for mid-sized banks to compete and streamline reporting requirements for smaller banks to make the sector more efficient and dynamic."