Financial system in Australia

The Australian financial system has several distinct sectors:
* Banks, credit unions and building societies
* Insurance (life and general)
* Superannuation
* Financial markets—debt, equity and derivative markets
* Payments systems—cash, cheques, EFTPOS, RTGS and other high-value payment systems

According to the Reserve Bank of Australia: "The financial system is the term used to comprehend the set of arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims." [Submission to the Committee of Inquiry into the Australian Financial System ("the Campbell Committee"), "Reserve Bank of Australia Occasional Paper No 7", December 1979, para 1.]

Banking

Banking in Australia is dominated by what are known as the "big four":
* ANZ
* Commonwealth Bank
* National Australia Bank
* WestpacThere are several smaller banks, and a system of credit unions throughout the country. Many large foreign banks have a presence, but few target the retail banking market. The central bank is the Reserve Bank of Australia (RBA). Australia is one of the few OECD countries not to have any explicit government guarantee or insurance of deposits held by banks, although in the past state and federal governments have provided financial assistance to failing banks.

History

Traditionally banks in Australia were identified as either trading banks, which dealt with businesses, and savings banks, whose business was mainly personal savings and home loans business. Many of these savings banks were owned by state governments.

As with many other countries, the great depression brought a string of bank failures. Two of the state-owned savings banks (of NSW and WA) would be bought out by the then federal owned Commonwealth Bank.

In 1961, central bank duties were transferred from the Commonwealth Bank to the newly created RBA, and the banking industry was slowly deregulated over the next two decades. The distinction between trading and savings banks was removed and banks were allowed to operate in the money market (traditionally the domain of merchant banks).

The boom and bust of the 1980s was another turbulent time for banks, with some establishing leading market positions, and others being absorbed by the larger banks. The 1990s saw the privatisation of the Commonwealth Bank, and increased competition from non-bank lenders, such as providers of securitised home loans.

Insurance

uperannuation

Financial markets

debt, equity and derivative markets
*Australian Securities Exchange
*Sydney Futures Exchange
*Newcastle Stock Exchange
*Bendigo Stock Exchange

Payments and clearing systems

*Australian dollar

Cheques

The cheque is still the most important non-cash payment instrument in Australia in terms of the value transferred using it each day.

Cheques and other payment instruments (such as travellers cheques and warrants) are cleared and settled pursuant to the regulations and procedures of the Australian Paper Clearing System..

Consumer electronic payments

*Bankcard
*EFTPOS

High value payments

High value payments are typically more time critical and for large sums. The main high value payment systems in Australia:
*SWIFT Payment Delivery System (SWIFT PDS)
*Clearing House Electronic Subregister System (CHESS): CHESS is an automated share transfer system developed by the Australian Securities Exchange. If a CHESS transaction is selected for RTGS settlement, then an interbank request is sent to RITS via the SWIFT FIN service. Upon settlement of the gross amount across ESAs, RITS notifies CHESS, which then settles the transaction at the CHESS participant level.

Regulation

*Reserve Bank of Australia
*Australian Competition and Consumer Commission
*Australian Securities Exchange

Notes and references