Australia Financial Institutions and its Structure & Activities

Introduction

The financial system of Australia has experienced tremendous change for more than two decades after the Campbell Inquiry sparked a period of financial liberalization. The purpose of financial intermediary services has changed in conjunction with the depth of financial markets, in addition to the obvious shifts that have altered the relative significance of all of the organizations operating in the world of finance. The capital institutions help the financial sector run effortlessly, provide important assistance to individuals and companies, and support growth in the economy. Therefore, the banking industry in Australia is powerful which is composed of a number of institutions that have become crucial to the economy of the country. This article highlights analyzes the structure and activities of Australian financial institutions emphasizing the major figures and their roles within the financial services sector.

Types of financial institution

There are basically three types of financial institution in Australia which are briefly discussed in the following table:

    

Different types of institutions	The regulator of those institution	Workings	Number of institutions	Total assets ($ billions)
Authorized Deposit-taking Institutions (ADIs)
Banks	APRA	Offering an array of financial products and services to all aspects of the financial system, such managing cash and insurance products	96	5531.3
Credit unions and building societies	APRA	They offer housing loans along with the payment services.	36	50.6
Non-ADI Financial Institutions
Money market corporations	ASIC	They offer services of borrowing and lending to the government agencies and big companies	5	29.3
Finance companies	ASIC	They offer services like lending money for people and businesses that are small to medium-sized.	102	295.5
Securitisers		Securities issued by special purpose entities supported with asset pools. Investments in securities often have improved credit.		106.6
Insurers and Funds Managers
Life insurance companies	APRA	Offer different types of insurance such as accident, life or disability.	27	93.4
General insurance companies[	APRA	Offer insurance to real estate, liabilities of employees, vehicles etc.	93	250.3
Health insurance companies	APRA	Offer health insurance for personal costs. The greater part of an asset's investments is in securities issued by governments, shares, etc	34	17.9
Superannuation and approved deposit funds	APRA	For the purpose of providing retirement income benefits, superannuation funds receive and handle funds from businesses and/or employees.	1651	3011
Public unit trusts	ASIC	Unit trusts are trusts that pool funds contributed by investors and deposit it typically in a particular kind of asset such as real estate, cash, stocks, loans, foreign securities, etc.		449.3
Cash management trusts	ASIC	Cash handling corporations are unit trusts that are open to the public, handled by a trust deed, and normally limit investment opportunities to financial products offered on a short-term market for money.		33.2
Common funds	State and territory authorities	Organizations that act as trustees pool cash contributed by the public at large, money kept on behalf of properties, and money held by powers of attorney into common assets. Typically, money gets invested in particular asset classes.		10.3
Friendly societies	APRA	Mutually owned collaborative banking organizations that operate in a trust-like manner while offering benefits to their users.	11	7.5

(Main types of financial institutions, n.d.)

Reserve Bank of Australia

The Reserve Bank Act of 1959 grants to the Reserve Bank of Australia (RBA), that serves as the country of Australia's central bank, responsibilities and power. It is charged with a responsibility for encouraging growth in the economy, full-time employment, and the overall well-being of the people of the country. To accomplish that, it conducts monetary policy in order to achieve an established medium- inflation objective, strives to preserve an efficient banking system and a functioning payments structure, and issues the national currency of the country. The Australian Government and its departments and agencies, as well as several kinds of nations with central banks and government agencies are provided by the RBA through certain financial services as necessary. the nation's gold and reserves of foreign exchange are likewise controlled by them. Using an effective communication program, the Reserve Bank of Australia aims also to improve the general public's understanding of its legal responsibilities and regulations.

According to the Reserve Bank Act 1959, the Reserve Bank has two Boards

• The Reserve Bank Board
• The Payment System Board (About the RBA, n.d.)

Operational structure of RBI

The Governor and the Deputy Governor, Philip Lowe manages and controls the workings of the Reserve bank of Australia. The bank has around 5 operational groups along with 6 supporting departments. The following table represents the different groups, their sub departments and the six supporting departments.

 

Name of Groups	Name of Departments
Business Services Group, Banking Department Note Issue Department Payments Settlements Department	Audit Department
Corporate Services Group,  Information Technology Department, Workplace Department Enterprise Data Office.	Finance Department
Economic Group, Economic Analysis Department Economic Research Department.	Human Resources Department
Financial Markets Group   Domestic Markets Department International Department.	Information Department
Financial System Group Financial Stability Department Payments Policy Department.	Risk and Compliance Department
	Secretary’s Department

(Operational structure, n.d.)

Australian banks

A significant portion of the assets that exist in the Australian financial system are held by financial institutions, who additionally have an important part in it. Banking engages in essentially every other aspect of financial intermediary service such as corporate banking, in addition to the typical retail deposit-taking and borrowing activities, insurance, stock broking, trading along with money management.  Throughout 1985, domestic balance sheets of banks have grown at an average annual pace of 13%, reflecting a combination of supply and demand dynamics, particularly in the mortgage lending sector (The Structure of the Australian Financial System ,2006).

In Australia, there are four big banks which are basically is dominating the whole banking sector of the country. Those four major banks are also called ‘big four’. The following are the names of those banks:

1. Commonwealth Bank (CBA),
2. Westpac (WBC),
3. Australia & New Zealand Banking Group (ANZ)
4. National Australia Bank (NAB)

These are the most well-known and renowned financial banks in the country which is essential in offering financial services to the people, companies and government. They offer variety of services by opening the saving and current accounts, offering loans, debit and credit cards.

Conclusion

The financial sector in Australia serves the economy of the nation in a strong diversified ecosystem. Every institution has a crucial function, from the Reserve Bank of Australia setting monetary policy to commercial financial institutions offering fundamental banking services, insurance businesses controlling risks, as well as superannuation funds safeguarding savings for retirement. Furthermore, the expansion and innovation of the financial sector are aided by securities exchanges, investment firms, and non-bank creditors. Collectively, these organizations guarantee the financial system's growth, effectiveness, and durability in Australia.