Economics for Business: Australian Banking Industry Analysis

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Economics for Business 1
Contents
Introduction......................................................................................................................................1
Banking Industry background..........................................................................................................1
Market structure...............................................................................................................................2
Banking Industry Issue....................................................................................................................3
Impacts of Issues on Australia Economy.........................................................................................4
Government Policy..........................................................................................................................6
Conclusion.......................................................................................................................................6
List of References............................................................................................................................8

Economics for Business 2
Introduction
The objective of the report is to enlighten the reader about the banking industry present in the
environment. The Australian banking sector is discussed in the paper to elaborate details about
the market and its impact on the economic aspects of the country as well. Every industry present
at the marketplace affects the economy of the country in either good or bad ways. The banking
sector is the sector that transacts in money and cash equivalent goods so this industry plays the
lead role in affecting level of the customers in the environment. The market structure of the
industry, government intervention and issues present with the industry are discussed in the paper.
More details about the report are discussed below:
Banking Industry background
The banking sector of Australia is majorly dominated by four organization that are
Commonwealth Bank, National Australian Bank, Australia and New Zealand Bank and Westpac
Banking Corporation. These are four major banks present in the country that highly affect the
whole banking industry of the country. Along with these banks, the industry also holds several
small banks, financial institutions, mutual banks etc. These banks provide limited services to the
people in the environment and are called authorised deposit-taking institutions (Matthews 2016).
The central bank of the country is Reserve Bank Australia (RBA). From the beginning of the
year 2008, the government of the country has guaranteed deposits up to $250,000 per customer
per against the banking failure. The banks of the country require license under the banking Act
1959 so as to operate its business functions in Australia. Religious Charitable Development
Funds (RCDFs) does not form a part of this license requirement procedure (RBA.Gov 2019).
The financial sector of the country is profitable as well as competitive and the government of the
country hold strong grip on the banking activities as well. The banking sector of the country is
the largest part of the financial system of Australia. The segment of the nation comprises of 147
authorised deposit-taking institutions that collectively hold more than 55% of the financial assets
of Australia. The ADIs are corporate body that has been granted authority by the Australian
Prudential Regulation Authority (APRA) to initiate the banking business activities. The heritage
bank of Australia is largest customer-owned bank of the country that further changed its name to

Economics for Business 3
Heritage Building Society in the year 2011 (The Stand 2019). The government of the country
states that the banking system of Australia is transparent and reliable. Also, there are differences
in this banking system of the country if compared to American banking system. The difference
between the retail and investment bank has almost nullified with the initiation of several
regulations in the environment. Currently, the banking system of the country is undergoing
deregulation and privatization and the government has started allowing foreign banks to enter in
the country and operate the business functions. The scope of functions for retail banks has started
to increase as now they provide a wide range of financial services along with corporate and
consumer loan services as well. These activities of retail banks increase the level of competition
with the merchant banks and brokerage houses as well. The government of the country has
allowed international banks to work under the wholesale market and the retail banking services
are allowed only to locally incorporated subsidiary (Export.Gov 2018).
The RBA is the body that set monetary policies and regulations for the financial system of the
country. APRA looks after the functions of credit unions, private health insurance, building
societies, life insurance general insurance and reinsurance companies. The segment held by
APRA includes assets worth USD3.7 trillion of 24 million depositors, superannuation fund
members and policyholders of the country (Steen, McGrath, and Wong 2016).
Royal Commission into misconduct in the Banking, Superannuation and Financial Services
Industry that is also known as Banking Royal Commission as well as Hayne Royal Commission
was established in the year 2017 by the government of Australia following to the Royal
Commission Act 1902. This body was formed to scrutinize and report the misconduct in the
banking sector, superannuation and financial services sector. This commission was established in
the environment so as to reveal the greedy culture prevailing in the Australian banking sector.
The banks and other financial institutions have started to forget their ethical code of conduct due
to which it had become an emergent need to form a commission to monitor the activities of such
bodies (Royal Commission 2018).
Market structure
The Australian industry has oligopoly market structure as a group of specific companies present
in the environment leads the market. Oligopoly and monopolistic competition are the two types