Financial Instrument and Markets: A Discussion on US and Australian Financial Institutions

FINANCIAL INSTRUMENT AND MARKETS

INTRODUCTION
Financial markets have turned out to be the most liquid & largest in the United States. In the year
of 2016, the finance altogether with insurance shows 7.3% of gross domestic product which is
$1.4 trillion in amount. This sector' growth is increasing at a high rate and has enumerated a
number of economic activities by way of direct and indirect jobs (Adelaja, 2015).
DISCUSSION ON US FINANCIAL INSTITUTIONS
The technology is the key base of the banking sector with annual expenditures of the industry
exceeding an estimate of $30 billion. Over the last years, the focus of the banking technology
developments has shifted. However, it is now experiencing a large number of mergers and
acquisitions after limitations on interstate branching and banking had been lifted and therfore, the
technology part of the merging of two entities turns out to be a challenging task. With increased
number of acquisitions, a number of lessons were learned by such institutions. However, with
time, the advancements in Internet and early adoption of it lead to an experience of dynamic
changes by the technology field. It resulted in a rapid increase in the market capitalization of
internet related entities. With heavy investments in internet, the focus of the banks moved to cost
reduction, strengthening and organizing. New advancements like Basel II and Check 21 are
coming into effect. Other innovations in the banking technology are also having an impressive
effect like web services, wireless connections, and increased bandwidth (Bierman & Smidt,
2010).
The security and flexibility remains one of the major concerns of this banking technology.
Community banks, being largely dependent on the technology, offer various products and
services so as to match with the requirements of the retail customers. Considering the increased
competition, even the small banks are getting under pressure to install well-functioning and
advanced technology so as to provide advanced services like supporting customers,
administration and financial accounting & reporting. It is clearly evident from the aforesaid facts
that the banks will continue to advance in terms of technology through internal growth &
acquisitions. Coming to the complexities, corporate governance and managerial diseconomies
arises. There is a heavy burden on the financial & risk management systems. Financial risk

models are used in this field for better management of risk & Basel II is being eventually
prepared for early implementation (Dayananda, Irons, Harrison, Herbohn, & Rowland, 2008).
Other advancements have been adopted by the banking technology such as cloud computing that
has expanded the mobile and online services and has reduced the costs and most importantly, is
meeting up the customer expectations. The other elements of data analytics and automation of
manual work through robotic processes are being continuously implemented to establish a strong
control & for the purpose of cost reduction. The advancements such as Internet of Things and
distributed ledger of technology were seen only in the initial stages of banks commercialization.
The benefits of such advanced technology could be enumerated in the following points
(Menifield, 2014)
:
 Increased access to Internet and better serving of customers.
 Provides enhanced opportunities in the risk management field.
 Increased speed of services in the market.
 Establishment of a strong control over operations.
 Transformation of institutional cost structures.
DISCUSSION ON AUSTRALIAN FINANCIAL INSSTITUTION
The Australian financial institutions are in the stage of facing continuous changes. The changes
can relate to the advancement of new innovative technology, uncertainty of failure of certain
systems, expansion of online system and elimination of manual work, all this altogether indicates
that the future of banks will be different from what banks are today. The capital ratios of banks
are above the minimums. The capital generation in this sector is being supported by high profits,
strong performance of bank assets, and the low charges of certain services like charge for bad
and doubtful debts and stabilization of nonperforming assets over past few months. A wide
variety of services rendered have been transformed with the technological advancements. Such
advancements aims at reducing the cost of providing services, transfers, storage of information,
etc (Peterson & Fabozzi, 2012). More complicated and well-functioned systems are used with
highly trained personnel. One of the key advancements in this field in Australia is increased use