Economics of Banking Industry

This presentation discusses the economics of the banking industry, including market structure and recent issues. It analyzes the impact of misconduct and the challenges faced by the sector. References: Newbold, P., Carlson, W. L. and Thorne, B., 2013. Statistics for business and economics. Salvatore, D., 2015. Managerial economics in a global economy.

Economics

Table of Content
• Introduction
• Introduction to the industry
• Different market structures
• Market structure of banking industry
• Summary of the issue associated with banking industry
• Analysis of the impact
• Conclusion
• References

Introduction
Economics for business is an element which is focused by
business entities for the purpose of analysing such changes which
are taking place in the market and may affect business in future.
For all the industries executing operations in a country it is very
important to be aware of the changes which are affecting
economy.

Introduction to the industry
Banking industry is one of the main sectors which are making
higher contribution in GDP of Australia. There are various
activities which are performed by it. These are lending money,
accepting deposits, allowing facilities such as credit, overdraft
and bills discounting. It is highly dominated by some of the
major players of the sector. These are Commonwealth Bank of
Australia, National Australian Bank, Australia and New Zealand
banking Group and Westpac Banking Corporation.

Different market structures
• Perfect competition
• Imperfect competition
• Monopoly
• Oligopoly

Market structure of banking industry
Banking industry adopts monopoly market structure because
there is no other sector in market which may compete with it.
Any other industry cannot deliver services which are rendered by
it. These are allowing credit, lending loans, accepting deposits,
providing facilities such as overdraft etc. This structure helps the
sector to be the price leaders and modify rates of interest
according to the choice. With the help of it higher profits could
be generated.

Summary of the issue associated with
banking industry
There is a main issue which has taken place recently and
affecting banking industry negatively. It is the recent Royal
Commission into misconduct in the Banking, Superannuation and
Financial Services Industry. Commissioner presented a report in
front of Governor general of Australia to provide information
regarding dishonesty and unfair treatment of financial institution
of the country.

Continued...
The report was not able to find solutions for various other issues
such as dispute among individuals, fix award compensation etc.
Due to this problem banking industry is facing various challenges
such as decreased customer engagement and bleeding money.

Analysis of the impact
Dishonest and unfair behaviour of major banking corporations of
Australia with customers have resulted in different issues for
whole industry. It is affecting the sector negatively because now
financial institutions and banks have to follow new guidelines
which are imposed by legal authorities of Australia to deal with
the problems.

Continued...
All the impacts of it are as follows:
• Reduction in number of customers
• Changes in mortgage broker
• Charges for services which are not provided
• Farmers to get a relief from loan in condition of natural
disasters
• Banks are required to have customer consent

Continued...
• Decrement in monetary resources
• Modifications in superannuation
• Banks have no right to determine value of land
Due to all the impacts banks have to perform all their operational
activities with new legislations so that governmental legislations
could be fulfilled.

Conclusion
This presentation concludes that all the industries are required to
analyse economy of the country in which companies under them
execute business. There is one of the main issue which is
affecting banking industry it is Royal commission in to
misconduct in banking, superannuation and financial services
industry. This issue has resulted in various negative impacts on
banking sector such as reduced number of customers and
decreased financial resources.

References
Newbold, P., Carlson, W. L. and Thorne, B., 2013. Statistics for
business and economics. Boston, MA: Pearson.
Salvatore, D., 2015. Managerial economics in a global economy.
OUP Catalogue.

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