What are the 3 main types of financial institutions in Australia?
- ADIs
- Non-ADI Financial Institutions
- Insurers and Fund Managers
Wholesale banking?
provision of services by banks to other financial institutions.
Includes:services offered to corporations and other large institutions, financial or otherwise.
What services fall under wholesale banking?
- Cash management services (acted as a broker rather than a dealer);
- Foreign exchange;
- Business-to-business payments;
- Trust services
- Custodial services (look after admin and document management)
- Commercial lending, and trade finance.
What is Retail Banking?
provision of banking services to individuals, focuses strictly on consumer markets (unlike wholesale banking); may extend to small & medium sized businesses
Non-ADIs FIs main supervisor/regulator?
ASIC
ADI main supervisor/regulator?
APRA
What do Finance Companies do?
Finance companies borrow mainly on financial markets, for example by issuing debentures.
•Lend to businesses:
•Commercial lending and covers
Who supervises public unit trusts and cash management trusts?
ASIC
What is a trust?
trusts pool investors’ funds, usually into specific types of assets
what is a Friendly society and who supervises?
APRA
Mutually owned co-operative financial institutions offering benefits to members through a trust-like structure
On what basis are commercial banks the largest and most diversified intermediaries?
are the largest and most diversified intermediaries on the basis of range of assets held and liabilities issued.
What are assets to banks?
•These assets consist of loans to consumers, businesses and governments.
What are liabilities to banks?
•Commercial banks’ liabilities consist of cheque and savings accounts, term deposits and bonds/bills.
Non-Bank Financial Institutions can be classified into 4 groups what are they?
- Building Societies
- Credit Unions
- Money-market Corporations
- Finance Companies
Can some NBFIs be ADIs?
Yes eg, Building Societies, Credit Unions
What are Building socities?
•Building Societies
•Listed entities or mutual ownership
•flourished before the 1980s, having a marked competitive advantage against the highly regulated banks
-example Bendigo Bank
What is a credit union?
Traditionally cooperatives in which membership is based on a common bond such as membership of a particular profession, a trade union, local community or religious group or working for the same employer (ie Unicredit, Qantas Staff Credit Union)
Who owns building societies?
organization owned by its members (rather than by external shareholders), which pays interest on deposits and lends money to enable members to buy their own homes.
Where does the money used in building societies come from?
•This money used to come exclusively from individual saving members who are paid interest
Why are building societies seen as community-based FIs?
they operate for the benefit of their depositors and borrowers and their community, unlike most non-mutual financial organisations, which work to maximiseprofits for shareholders through dividends.
What is the ethos of credit unions?
self-help
Formed to help the average Australian take control of their financial destiny, and to improve access to financial services for groups with a common bond or heritage
What are the characteristics of a mutually owned institution?
- Voting rights => 1 per member, regardless of financial commitment
- Ownership comes from membership which is based on acquiring a product or service from the organisation, rather than contributing capital
- Ownership can not be traded
- Established as co-operative, members pooling resources to achieve a specific objective
How is the profit of mutual ownership distributed?
•Profit distributed through bonuses or reduced premiums and charges or re-invested in the organisation
Can mutual ownership easily access other capital?
No
