Financial Instruments and Institutions

Running head: FINANCIAL INSTRUMENTS AND INSTITUTIONS
Financial instruments and institutions
Name of the Student
Name of the University
Author Note

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FINANCIAL INSTRUMENTS AND INSTITUTIONS
Table of Contents
Answer to task 1:........................................................................................................................2
Introduction:...............................................................................................................................2
Discussion:.................................................................................................................................2
Conclusion:................................................................................................................................4
Answer to task 2:........................................................................................................................4
Introduction:...............................................................................................................................4
Discussion:.................................................................................................................................4
Conclusion:................................................................................................................................8
Answer to task 3:........................................................................................................................8
Introduction:...............................................................................................................................8
Discussion:.................................................................................................................................8
Conclusion:..............................................................................................................................10
Reference list:...........................................................................................................................12

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FINANCIAL INSTRUMENTS AND INSTITUTIONS
Answer to task 1:
Introduction:
The report is prepared to identify the main types of financial institutions that are
classified by the Reserve Bank of Australia. For this purpose, the performance, roles and
responsibilities played by each financial institution have also been presented. The Reserve
Bank of Australia has divided the financial institutions in into three categories comprising of
non-authorized deposit taking institution, authorized deposit taking institution and funds and
insurance managers.
Discussion:
All the three categories of the financial institutions classified by RBA are explained
below:
Non-authorized deposit taking institute:
Different types of institutions that are classified as non-authorized institutions include
finance companies, money market corporations and securitizes. Finance companies
comprised of pastoral finance companies and general financiers and money market
Corporations include broker dealers. The function of finance companies is to raise funds from
retail investors and wholesale market using unsecured notes and debentures. Money market
Corporation on other hand has its operation primarily in wholesale market and provides
lending facilities to large corporations and bank along with some other services such as
capital market, capital finance, investment management and foreign exchange (rba.gov.au,
2019). Securitisers are the special purpose vehicle that uses pool of assets to issue securities.

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FINANCIAL INSTRUMENTS AND INSTITUTIONS
The credit enhancements of the securities are usually done by way of guarantee from third
parties.
Authorized deposit-taking institute:
Building societies, banks and credit unions are categorized as authorized deposit
taking institute, which are managed by APRA. Banks are the financial institution having the
function of providing wide range of financial services including insurance and fund
management services. Credit unions provide service to economy by way personal loan,
deposit and payment service to members. Building societies shave the same function as that
of credit unions (rba.gov.au, 2019).
Funds and insurance managers:
The type of financial institution that operates as insurance and fund managers include
life insurance companies, health insurance companies, approved deposit and superannuation
funds and general insurance companies all of which are regulated by APRA. The function of
Health Insurance Company is to provide insurance for covering the private cost of health and
investment is mainly done in government securities, loan and equities. Life insurance
companies provide accident, disability and life insurance, investment and superannuation,
annuities. Assets of this financial institution are invested mostly in securities and equities and
are managed on fiduciary basis in statutory funds. General insurance companies on other
hand provide motor vehicle, property and liability to employer by investing in government
securities, loan and deposit and equities. Other institutions operate as fund managers such as
public unit trust, approved and superannuation deposit funds, friendly societies, common
funds and cash management trust which are regulated by ASIC. Cash management trust is the
trust unit that is governed by trust deeds and their investment is generally confined to the
financial securities in the short-term money market (Viney & Phillips, 2012). Public unit trust