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Regulation of Australian Banks

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Regulation of Australian Banks 9 REGULATION OF AUSTRALIAN BANKS By Student’s Name: Course code + name: Professor’s name: University name: City, State: Date of Submission The Australian nation is one of the reputable countries in terms of financial regulation. The banking sector is one of the efficient sectors that are relied upon for the success of the country’s economy. In this case, this discussion will examine the history of bank regulation in Australia, the current state as it

Regulation of Australian Banks

   Added on 2020-04-01

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Regulation of Australian Banks 1REGULATION OF AUSTRALIAN BANKSBy Student’s Name:Course code + name:Professor’s name:University name:City, State:Date of Submission
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Regulation of Australian Banks 2The Australian nation is one of the reputable countries in terms of financial regulation. This is attributed to the fact that the country has put sufficient policies that govern the sector. Thebanking sector is one of the efficient sectors that are relied upon for the success of the country’s economy. Today, any country that wishes to compete favorably and sustain its population must invest heavily in the financial sector and regulation of the same. The success of Australia is a story that began long ago and there is enough documentation to depict this state of affairs. In thiscase, this discussion will examine the history of bank regulation in Australia, the current state as it stands and how the sector can be improved in the future. (Russo 2016, p. 235-260)The history of bank regulation dates back to the nineteenth century. This was the dawn ofmany other economies and to be specific, Australia formed its first back during this period. Given that this was a colonial era, Australia exercised most of its regulation from its areas of influence which included states. The business of starting and executing activities of banking and regulation did not go on in a smooth way. The end of the nineteenth century saw a terrible fluctuation whereby the states under the influence of Australia underwent a series of depressions.Such states included Victoria. When these trends could not be contained any more, the country lost its economic course through a collapse of several banks. (Milbourne et al. 2010)The beginning of the twentieth century in the year 1901 was characterized by the establishment of a federation which was enjoined in the Commonwealth association. This implied that the regulatory activities would be executed by this world known setup which had themuscle to ensure that the regulations would be followed to the latter. Through the efforts of the Commonwealth stakeholders, Australia established a central bank which would be used to execute most of the regulatory processes. Apparently, since the establishment of the central bank
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Regulation of Australian Banks 3up to the modern days, Australia has not had any turmoil in the banking sector and no bank has collapsed as a result. (Jarvis 2013, p. 456-467)The aftermath of the Second World War created the perception that the government had the capacity to control the economy because it had shown indications that it would also regulate banks. As a consequence, new rules were set up. The rules bordered on the capacity to lend, ratesof interest, bank reserves and the securities that the government can access. The central bank wasderived from the then RBA which was tasked with the duty of oversight upon other banks. The movement of time was described by the changes in the trends in the banking sector. This meant that the sector adopts the new policies as time dictated. More specifically, there was a committee that was formed in the year 1970 and it was known as the Campbell Committee. The suggestionsin its report led to a new turn of events which saw the whole banking system deregulated. (Ferranet al. 2015)The results of the Campbell Committee report adversely affected the regulation of the banking sector. This prompted the stakeholders to reintroduce the regulation policies through a process that was called re-regulation. This new development highlighted the weaknesses in the report and did away with most of the suggestions that had resulted to a system of lawlessness in the sector. Re-regulation was facilitated through the introduction of APRA and ASIC which tookcharge of the situation by instituting new regulations that increased the powers of the Reserve Bank of Australia (RBA) which was later upgraded to the central bank. (Jacob et al. 2010)The Australian financial sector has had to undergo some turbulent times despite the fact that it has implemented the regulatory policies. For instance, the last decade has been described by governance deficiencies attributed to the lack of accountability by the financial advisers. This
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Regulation of Australian Banks 4has adversely affected the banking sector which has been depicted as a weak entity among other sectors in the operationalization of the Australian government (International 2012, p. 654-666). There are more issues related to the sector and one of them is the insurance claims which have not been fulfilled. These claims are quite rampant and the situation puts the banking sector at riskof losing international repute which had been built over a long period of time. Besides, there is a claim that a major bank in the country has not taken any regulatory steps to reprimand the individuals who were involved in a series of events that border on the money laundering misconduct in the banking sector. (Jang et al. 2012)Having examined the rich history of the Australian regulation of banks, it is prudent to build upon the history by examining the current status of the banks and the processes of regulation forthwith. The process of bank regulation in modern day Australia is described by the systems of governance and the structures that have been instituted to supervise all the banks (Mohamed et al. 2012). This arrangement is fulfilled through parliamentary legislations, issuanceof licenses, creating liquidity rules and establishment of requirements for foreign investors. To strengthen this process, the stakeholders must incorporate the services of the international organizations which also act as the regulatory agencies. (McElroy et al. 2009)In terms of legislation, the parliament of Australia often creates laws that govern the banking sector. The parliament derives the laws from previous legislations by amending the acts and statutes which were formed in the past. Some of the acts include the Banking Act of 1959, Reserve Bank Act of 1959 and the 2001 Corporations Act that is the latest to be reviewed in the parliament. Apart from the acts of parliament, there are other regulatory bodies. The first one is the Australian Prudential Regulatory Authority (APRA) (Fleming 2014, p. 87-90). This is a bodythat was also created by an act of parliament and the main duty that it performs is to regulate
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