Structural options

One product name cannot make three different legal claims equivalent.

HomeFund could be structured as a deposit, an unsecured bank note or a mortgage-covered bank note.

Those are not cosmetic variations.

They change who owes the customer, whether the Financial Claims Scheme may apply, insolvency ranking, mortgage rights, disclosure, liquidity, accounting, tax, operating cost and what “principal protection” can honestly mean.

The current work therefore does not select a structure. It keeps three controlled validation cells open, parks one unresolved concept and rejects direct mortgage-pool exposure as the initial direction.

Compare the three active cells

See the structure decision gates

No external legal opinion, APRA position, accounting sign-off, tax opinion or structure decision has been obtained.

Choose the legal claim before writing the proposition

HomeFund cannot remain simultaneously described as deposit-like, investment-like, mortgage linked, principal protected and tradeable.

The customer proposition must follow the actual legal claim.

It must not blend familiar features from different product categories to imply a combination of rights that no structure provides.

For every option, the bank must answer:

What exactly does the customer hold?
Which legal entity owes principal?
Is the obligation secured or unsecured?
Does the Financial Claims Scheme apply?
What is the holder’s ranking if the bank fails?
Do mortgage assets provide direct recourse?
When is principal due?
What happens before maturity?
Who provides cash for an early exit?
What disclosure, distribution and governance standards apply?

A product name, banking interface or mortgage-purpose statement cannot answer those questions.

The current structural universe

Three cells continue. One concept is parked. One is rejected for the initial design.

Continue for formal validation

Cell A — Purpose-branded term deposit

Mandatory consumer and bank-economic baseline.

Cell B — Senior unsecured retail note

Leading investment-form research option.

Cell C — Mortgage-covered retail note

Contingent secured option.

Park

Transferable or brokered deposit

Parked pending proof that transfer can preserve protected-account status, Financial Claims Scheme treatment, depositor priority and scalable account-holder records.

Reject for initial design

Managed or securitised mortgage exposure

Rejected while the bank is intended to retain mortgage credit risk and provide the principal obligation. Retained only as a comparator or future redesign.

These statuses are research postures, not product approvals.

Common assumptions across the active cells

The structures must be tested against the same proposition.

The controlled validation assumptions are:

Fixed controlled assumptionsResearch variablesRisk and protection boundariesCell-specific linkage

sponsor is a locally incorporated major Australian authorised deposit-taking institution;
Australian-dollar product;
initial distribution to Australian retail customers;
three-year and five-year term cells;
fixed return determined for each issue;
approximately 5 per cent used only as a disclosed research cell;
bank retains mortgage underwriting and credit-loss risk;
investors do not select or own individual mortgages;
no first-loss mortgage exposure is transferred;
no unconditional bank buyback at principal;
no tax, FCS, APRA, accounting or capital benefit assumed before confirmation;
principal due at maturity is not protection of early market value;
investor transfer, issuer repurchase and redemption are separate mechanisms;
issue windows rather than permanent availability; and
the earliest legal and practical exit governs tenure analysis.

Cell A targets Level 2 controlled mortgage-funding allocation.

Cell B targets Level 2 controlled mortgage-funding allocation.

Cell C tests Level 3 mortgage cover-pool linkage.

Cell A — Purpose-branded term deposit

The clearest claim may also be the least distinctive.

Mandatory baseline and potential kill comparator

What the customer would hold

An Australian-dollar deposit account with the issuing bank for a defined term.

The bank would owe the account balance and agreed interest under the deposit terms.

The customer would be a depositor and creditor of the bank. They would not own, select or hold security over mortgages.

Protection and ranking

This structure provides the strongest potential path to:

protected-account treatment;
Financial Claims Scheme coverage within applicable limits and rules; and
depositor-priority treatment.

None is assumed merely because the product is called a deposit. Final account terms, currency, holder records, account type and legal treatment must be confirmed.

Mortgage linkage

Level 1 or Level 2 only:

a stated residential mortgage-funding purpose; or
controlled allocation, reporting and assurance.

The deposit would not give customers security over mortgages or ownership of mortgage cash flows.

Term and early access

A defined maturity may create contractual funding certainty.

That value depends on:

notice rights;
hardship and deceased-estate treatment;
routine bank practice;
early-withdrawal adjustments; and
the earliest date funds are legally and practically available.

A nominal long term is not valuable where access is routinely available.

Disclosure and distribution

The customer would need clear disclosure of:

exact FCS position;
term and maturity;
return;
early-withdrawal notice and adjustment;
hardship and deceased-estate treatment;
mortgage-purpose methodology;
no mortgage ownership or security;
fees and tax reporting; and
ordinary savings and term-deposit alternatives.

Target-market and distribution controls remain required where applicable.

Prudential, accounting and tax posture

A deposit would ordinarily be a bank financial liability.

The exact terms require confirmation for:

LCR and NSFR;
effective maturity;
deposit behaviour;
FCS systems and Single Customer View;
interest-rate and hedge treatment;
accounting measurement;
customer interest reporting;
withholding; and
unrecovered GST and product costs.

Operating model

This cell can reuse the largest share of established bank capabilities:

account opening;
deposit ledger;
interest and maturity processing;
statements and tax reporting;
FCS records;
complaints, hardship and deceased estates; and
digital servicing.

It still adds mortgage-purpose attribution, assurance, source-of-funds measurement, cannibalisation controls, profitability and comprehension monitoring.

Strongest challenge

It may be an ordinary term deposit with a higher rate and a mortgage-purpose narrative.

The bank may pay more for money it already holds without delivering distinctive customer value.

Cell B — Senior unsecured retail note

The cleanest investment form creates issuer risk, market-value risk and a disclosure challenge.

Leading investment-form research option · Not selected

What the customer would hold

A fixed-term senior unsecured debt obligation issued by the bank.

Principal and coupon would be contractual obligations of the issuing bank.

The note would normally have Level 1 or Level 2 mortgage-purpose linkage, not mortgage collateral security.

Classification must come first

The boundary between:

a deposit accepted in the ordinary course of banking;
an ADI debenture;
a security; and
another financial product

depends on the exact legal terms.

Calling the product an “investment”, “unit”, “deposit note” or “HomeFund” does not determine its category.

External legal counsel must classify the final terms before the customer proposition is written.

Protection and ranking

No FCS treatment is assumed.

The investor would ordinarily be an unsecured creditor of the bank, subject to the final contractual and statutory ranking.

Principal due at maturity would be an obligation of the same bank whose distress or failure creates the credit risk.

It is not separate insurance against issuer failure.

Disclosure must exceed a possible exemption

An offer of an Australian ADI’s debentures may fall within a statutory Chapter 6D disclosure exemption.

That exemption cannot become the customer-protection standard.

The research condition is:

prospectus-equivalent disclosure;
target-market-determination-equivalent governance;
distribution controls;
product reviews;
significant-dealing escalation; and
ongoing outcome monitoring.

The offer document would need to explain:

issuer and ranking;
non-FCS status;
insolvency and resolution exposure;
principal due at maturity only;
market-value risk before maturity;
no guaranteed buyer;
transfer mechanics and pricing;
no bank repurchase obligation;
mortgage-purpose limits;
return setting;
fees and tax;
conflicts; and
simpler alternatives.

Licensing and operating model

The bank and related entities would need confirmed permissions and controls for:

issue and dealing;
general and personal advice;
arranging and brokerage;
custody and registry;
market making;
transfer-platform operation;
pricing and valuation;
market-abuse surveillance;
AML/CTF, sanctions and fraud;
coupon and maturity payments;
tax statements;
complaints and deceased estates; and
stress communications.

Existing banking or AFS licences cannot be assumed to cover every proposed activity.

Liquidity and tenure

Investor-to-investor transfer could preserve the issuer liability because only the holder changes.

It would not guarantee:

a buyer;
a particular price;
principal before maturity; or
market depth under stress.

An issuer repurchase may extinguish the liability and return funding risk to the bank.

No unconditional bank put or at-principal early redemption is permitted in the base cell.

Accounting and tax posture

The note would ordinarily be a financial liability of the bank, commonly measured at amortised cost unless the final terms require otherwise.

The final instrument must determine:

effective interest treatment;
fair-value and market-risk disclosure;
repurchase and extinguishment;
hedge accounting;
investor coupon;
disposal gain or loss;
debt-equity treatment;
TOFA;
withholding;
GST; and
tax-reporting obligations.

Strongest challenge

The product may receive less mandatory disclosure than customers expect while the major-bank brand implies more protection than the legal claim provides.

Once customers understand non-FCS issuer risk and possible early-sale loss, the required return may eliminate the bank-value corridor.

Cell C — Mortgage-covered retail note

Stronger mortgage linkage is not a free protection upgrade.

Contingent escalation option · Not default

What the customer would hold

A fixed-term bank obligation supported by an identified residential mortgage cover pool.

The intended concept is dual recourse:

a claim against the issuing bank; and
defined recourse to the cover pool after specified default conditions.

This requires confirmation under the Banking Act covered-bond framework and relevant prudential requirements.

Protection and mortgage rights

The covered structure provides the strongest active mortgage linkage.

It is not:

Financial Claims Scheme protection;
a government guarantee;
ownership of individual mortgages;
ordinary receipt of borrower cash flows; or
protection of early market value.

The customer’s rights would arise from the bank obligation and legally defined collateral recourse.

Legal and prudential infrastructure

A credible covered structure may require:

issuing-bank and special-purpose-vehicle roles;
trustee or monitor arrangements;
cover-pool eligibility;
asset transfer and beneficial ownership;
security perfection;
asset registers;
substitution and over-collateralisation;
collateral valuation and top-up;
derivatives and service-provider rights;
continuity following issuer distress;
APRA reporting and notification; and
formal recovery and resolution treatment.

Covered-bond assets are subject to statutory limits, including the current aggregate cover-pool cap under the Banking Act framework.

Retail disclosure

The retail offer would require the Cell B protections plus clear explanation of:

bank and SPV roles;
dual recourse;
cover-pool composition;
over-collateralisation;
substitution;
access triggers;
priority and competing claims;
encumbrance;
derivatives and service dependencies;
no FCS or government guarantee; and
market value before maturity.

“Mortgage covered”, “secured”, “mortgage backed” and “capital protected” wording requires external legal and consumer validation.

Treasury and operating cost

The structure would compete with the bank’s existing institutional covered-bond program.

The economic model must recognise:

scarce collateral and encumbrance capacity;
the statutory cover-pool limit;
effect on unsecured creditors;
secured-funding contingency capacity;
collateral administration;
SPV governance;
mortgage data and privacy;
cover-pool assurance;
retail registry and servicing;
valuation and transfer;
stress top-up; and
opportunity cost of existing covered-bond issuance.

Accounting and tax posture

The bank obligation would remain a financial liability.

The structure also requires conclusions on:

SPV consolidation;
mortgage-asset derecognition or continued recognition;
structured-entity disclosure;
collateral and fair-value reporting;
derivatives and hedge accounting;
asset-transfer and substitution tax;
SPV tax treatment;
GST;
withholding;
tax consolidation; and
possible duties or transactional taxes.

No accounting or tax neutrality is assumed.

Strongest challenge

The bank may use scarce cover-pool capacity and recreate an existing institutional funding structure simply to make the mortgage narrative more tangible to retail customers.

What is parked or rejected

Parked and rejected options remain outside the active validation cells.

Park

Transferable deposit — Park

The concept attempts to combine:

deposit status;
possible FCS treatment;
hard term; and
investor transfer without bank redemption.

The unresolved question is whether transfer, novation, nominee holding or a wrapper can preserve:

the protected account;
the correct account holder;
FCS treatment;
depositor priority;
Single Customer View records;
tax reporting; and
scalable operations.

A wrapper representing a beneficial interest in a master deposit may instead become a separate security whose investor is not the protected account holder.

The option remains parked until legal and operational evidence establishes a clean mechanism.

Reject for initial design

Managed or securitised mortgage exposure — Reject for the initial direction

This structure would provide the strongest direct mortgage-pool or cash-flow linkage.

It would also materially change HomeFund by moving toward:

managed-scheme or securitisation rights;
mortgage-asset or waterfall exposure;
possible transfer of credit or liquidity risks;
responsible-entity, trustee, custody and valuation requirements;
PDS and mortgage-scheme disclosure;
consolidation and derecognition questions; and
substantially greater customer complexity.

It remains inconsistent with the current directions that the bank retain mortgage credit risk and owe principal.

It is retained as a comparator and possible future redesign only.

Protection comes from law and contract

“Principal protected” is not one structural feature.

Deposit protection pathway

Potentially includes:

bank contractual obligation;
protected-account treatment;
depositor priority; and
FCS protection, if the exact account and holder qualify.

Senior-note pathway

Includes:

unsecured contractual obligation of the bank;
statutory and contractual ranking; and
issuer solvency and resolution exposure.

No FCS is assumed.

Covered-note pathway

Includes:

contractual obligation of the bank; and
defined collateral recourse under the covered structure.

No FCS or government guarantee is assumed.

Early market value

None of the three pathways automatically protects a price before maturity.

Protection must identify:

provider;
legal source;
ranking;
conditions;
maturity point;
early-exit treatment; and
issuer-failure outcome.

Protection-source comparison — potential pathways requiring specialist confirmation
Option	Legal claim	Possible protection source	FCS assumption	Insolvency or resolution exposure	Mortgage recourse	What is not protected	Specialist confirmation required
Cell A	Deposit account with the issuing bank	Strongest potential path to protected-account treatment and depositor priority	Potential coverage within applicable limits and rules; not confirmed	Final account and legal treatment must be confirmed	None; Level 1 or Level 2 linkage only	Mortgage ownership, mortgage security and early market value	Legal, FCS, prudential, accounting and tax treatment
Cell B	Senior unsecured issuer obligation	Bank contractual obligation and final statutory ranking	No FCS treatment is assumed	Unsecured issuer solvency and resolution exposure	None; Level 1 or Level 2 linkage only	Issuer failure, a buyer, principal before maturity and market price	Classification, ranking, licensing, disclosure, accounting and tax
Cell C	Bank obligation plus possible cover-pool recourse	Contractual obligation and legally defined collateral recourse	No FCS treatment is assumed	Issuer exposure plus defined default and cover-pool conditions	Level 3 cover-pool recourse, subject to confirmation	Government insurance, individual mortgage ownership, borrower cash flows and early market value	Covered-bond framework, prudential treatment, collateral, accounting and tax
Early market value	Price or adjustment before contractual maturity	No automatic protection pathway	None assumed	Depends on the actual claim, market and issuer condition	Does not itself protect a sale price	None of the three pathways automatically protects a price before maturity	Exact early-exit mechanism, pricing and stress treatment

“Major-bank issued” and “mortgage linked” are not protection mechanisms.

Liquidity changes the structure

Transfer, repurchase and redemption cannot be treated as one promise.

Investor transfer

One investor sells or assigns the claim to another.

buyer provides cash;
issuer liability may continue;
price is market or negotiated;
principal is not guaranteed.

Issuer repurchase

The bank acquires its own obligation.

bank provides cash;
liability may be extinguished;
practical tenure may shorten;
market-support expectations can arise.

Redemption

The bank pays under a contractual right or maturity event.

issuer provides cash;
liability reduces or ends;
effective maturity follows the earliest exercisable right.

Liquidity-mechanism comparison — transfer, repurchase and redemption remain separate
Mechanism	Cash provider	Whether issuer liability remains	Price	Tenure effect	Stress risk	Relevant cells
Investor transfer	Buyer	May continue because only the holder changes	Market or negotiated; principal is not guaranteed	May preserve the issuer liability	No buyer, unacceptable price or weak market depth	Cells B and C; transferable deposit remains parked
Issuer repurchase	Bank	May be extinguished	No unconditional at-principal promise	Practical tenure may shorten	Market-support expectations and funding risk can return to the bank	Note cells only if separately controlled
Redemption	Issuer	Reduces or ends	Set by the contractual right or maturity event	Effective maturity follows the earliest exercisable right	Earlier outflow and concentrated funding need	Every cell according to its exact terms

A customer-friendly liquidity feature may undermine prudential maturity, accounting, Treasury economics and the structure’s original rationale.

Every proposed liquidity mechanism must state who pays, whether funding remains outstanding, how price is set and what changes under stress.

Legal minimum versus fair-customer standard

An exemption does not prove that less disclosure is fair.

The note cells must be tested against the standard required for informed consumer outcomes, not merely the minimum procedure that may apply to an ADI issuer.

Possible statutory position

Structure-specific legal minimum

structure-specific legal minimum;
potential ADI debenture exemption;
application requires counsel confirmation.

Controlled HomeFund standard

Informed consumer outcomes

The controlled research standard for Cells B and C includes:

prospectus-equivalent offer disclosure;
target-market-determination-equivalent governance;
distribution controls;
ongoing monitoring;
stress examples;
clear FCS status;
issuer and resolution risk;
maturity and early value;
mortgage-linkage limits;
tax;
conflicts;
ongoing reporting; and
comparison with simpler alternatives.

The bank must be willing to maintain these protections even where external counsel concludes that a statutory requirement does not technically apply.

Legal, prudential, accounting and tax are connected

A favourable answer in one discipline can change the question in every other discipline.

Examples:

Legal classification changes

Re-open:

APRA treatment;
accounting;
tax;
disclosure;
customer testing; and
Treasury economics.

FCS conclusion changes

Replace protection wording and re-test:

customer demand;
target market;
pricing;
tax reporting; and
operating processes.

APRA effective maturity

Effective maturity changes

Rebuild:

tenure value;
LCR and NSFR;
hedge economics;
accounting disclosure; and
funding benefit.

APRA additional liquidity changes

Re-open:

Treasury economics;
customer return;
liquidity controls; and
operating feasibility.

Issuer repurchase is accounting extinguishment

Remove any claim that the bank can purchase the note while preserving the same funding liability.

SPV consolidation or asset recognition changes

Reconcile:

balance sheet;
capital;
tax;
investor disclosure; and
covered-note economics.

Tax character changes

Re-test:

after-tax customer comparison;
return wording;
reporting;
all-in bank cost; and
informed demand.

GST leakage changes

Re-open:

all-in bank cost;
operating scale;
pricing; and
the economic corridor.

Consumer requirement for par access

Re-open:

liquidity design;
effective maturity;
accounting;
Treasury value; and
structure selection.

Weak Level 3 value

Re-open:

Cell C encumbrance;
covered capacity;
retail disclosure;
operating cost; and
the Level 2 alternative.

Insufficient operating scale

Re-open:

structure complexity;
issue size;
customer value;
bank economics; and
simpler alternatives.

No specialist conclusion can be added to another specialist conclusion unless both apply to the same versioned terms.

One controlled product version

Specialist opinions must be reconciled, not stacked.

A material term change can alter every conclusion.

The controlled process requires:

Common assumptions scheduleone assumptions schedule;
Versioned cell term sheetone versioned term sheet for each cell; clear sub-cells for every material variant;
Exact specialist scopespecialist identification of the exact version assessed;
Dependency registerdependency mapping;
Changed-term controlre-opening affected opinions after a change;
Reconciliation workshopone reconciliation workshop; and
Project-owner decisionproject-owner approval of the reconciled position.

Individually favourable opinions do not establish a coherent product where each specialist assessed different:

term;
holder;
protection;
transfer;
redemption;
mortgage linkage;
distribution; or
issuer-support assumptions.

False convergence is a structure risk.

Comparative structural matrix

The cells must be compared as different claims, not ranked as cosmetic variants.

Qualitative comparison only. Every treatment remains subject to the exact terms and specialist confirmation.

Qualitative comparison of the three active validation cells — no selected structure
Comparison field	Cell A — Purpose-branded term deposit	Cell B — Senior unsecured retail note	Cell C — Mortgage-covered retail note
Legal claim	Australian-dollar deposit account	Senior unsecured debt obligation	Bank obligation with possible cover-pool recourse
FCS path	Strongest potential path; not confirmed	No FCS treatment assumed	No FCS treatment assumed
Insolvency position	Depositor and creditor; final priority treatment requires confirmation	Unsecured creditor, subject to final ranking	Dual recourse subject to final covered-structure terms
Mortgage linkage	Level 1 or Level 2	Level 1 or Level 2	Level 3 cover-pool linkage
Bank-retained mortgage risk	Bank retains underwriting and credit-loss risk	Bank retains underwriting and credit-loss risk	Bank retains underwriting and credit-loss risk
Principal provider	Issuing bank under deposit terms	Issuing bank under note terms	Issuing bank plus defined collateral recourse after specified conditions
Hard term	Defined maturity, subject to notice and access treatment	Fixed term; no unconditional at-principal early redemption	Fixed term; liquidity and default conditions require confirmation
Investor transfer	Transferable-deposit concept remains parked	Could preserve the issuer liability; no buyer guaranteed	Would require controlled transfer, valuation and service infrastructure
Early price	Depends on early-withdrawal rights and adjustments	Market or negotiated; principal is not guaranteed	Market value before maturity is not protected
Legal complexity	Established deposit pathway; exact treatment requires confirmation	Classification and licensing boundary requires external counsel	Covered-bond, SPV, collateral and dual-recourse infrastructure
Prudential complexity	Effective maturity, LCR, NSFR, FCS and deposit behaviour	Effective maturity, liquidity and resolution treatment	Covered capacity, encumbrance, cover-pool limits and resolution treatment
Accounting and tax complexity	Deposit liability, reporting, withholding and GST costs	Liability measurement, extinguishment, hedging, TOFA, withholding and GST	SPV consolidation, asset recognition, collateral, derivatives and asset-transfer tax
Operating complexity	Largest reuse of established bank capabilities, with added attribution and assurance	Registry, dealing, transfer, valuation, surveillance and servicing controls	Cover-pool, SPV, assurance, collateral, retail registry and servicing controls
Customer comprehension	Clearest claim but may be least distinctive	Issuer risk, non-FCS status and early-sale loss must be understood	Dual recourse, encumbrance and no government guarantee must be understood
Current status	Mandatory baseline and potential kill comparator	Leading investment-form research option · Not selected	Contingent escalation option · Not default

The validation sequence

Structure selection comes after threshold review, reconciliation and informed testing.

Phase 0
Phase 0 — Freeze the cells
Approve common assumptions, exact draft terms and controlled variants.
Phase 1
Phase 1 — Threshold reviews
Obtain:
- legal classification;
- FCS and priority;
- preliminary APRA treatment;
- accounting classification; and
- tax classification.
Do not commission detailed operating design for a cell that fails a threshold review.
Phase 2
Phase 2 — Detailed specialist work
Complete:
- legal memorandum;
- prudential matrix;
- accounting paper;
- tax paper;
- initial Treasury model; and
- initial operating model.
Phase 3
Phase 3 — Reconciliation
Compare assumptions, resolve conflicts, revise terms, re-open affected opinions and determine which cells remain coherent.
Phase 4
Phase 4 — Structure-specific consumer testing
Use the actual rights, conditions and alternatives of each surviving cell.
Measure informed demand, minimum informed return, rejection and misunderstanding.
Phase 5
Phase 5 — Bank-specific economics and operating feasibility
Test source-attributed economics, full cost, scale, stress, controls and market capacity.
Phase 6
Phase 6 — Structure decision
Choose one of:
- proceed to controlled pilot design;
- simplify to term deposit;
- retain research only;
- park pending market conditions; or
- reject HomeFund.

Decision statuses

Four equal-status research decisions govern the next step.

Continue

Use only where:

no hard fail is triggered;
every specialist assessed the same terms;
dependencies are reconciled;
material treatment is confirmed or bounded;
customer and bank value corridors remain plausible; and
remaining work is evidence gathering rather than structural redesign.

Park

Use where an option may be feasible but a threshold question remains unresolved and further progression would create wasted cost or misleading testing.

Reject

Use where:

the legal claim cannot be explained accurately;
the product depends on misunderstanding;
protection claims cannot be supported;
economics fail;
acceptable liquidity destroys tenure;
operating complexity is disproportionate;
a simpler alternative dominates; or
specialist conclusions cannot be reconciled.

Redesign required

Use where a material term must change and every dependent discipline must re-test the revised structure.

A changed product is not the same validated product.

Continue is a research decision status, not product approval.

Structural kill conditions