The Australian financial system has several distinct sectors:
- Banks, credit unions and building societies
- Insurance (life and general)
- Superannuation
- Financial markets—debt, equity and derivative markets
- Payments systems—cash, cheques, EFTPOS, RTGS and other high-value payment systems
According to the Reserve Bank of Australia: "The financial system is the term used to comprehend the set of arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims."[1]
Contents |
Banking
Banking in Australia is dominated by what are known as the "big four":
There are several smaller banks, and a system of credit unions throughout the country. Many large foreign banks have a presence, but few target the retail banking market. The central bank is the Reserve Bank of Australia (RBA). Australia is one of the few OECD countries not to have any explicit government guarantee or insurance of deposits held by banks, although in the past state and federal governments have provided financial assistance to failing banks.
History
Traditionally banks in Australia were identified as either trading banks, which dealt with businesses, and savings banks, whose business was mainly personal savings and home loans business. Many of these savings banks were owned by state governments.
As with many other countries, the great depression brought a string of bank failures. Two of the state-owned savings banks (of NSW and WA) would be bought out by the then federal owned Commonwealth Bank.
In 1961, central bank duties were transferred from the Commonwealth Bank to the newly created RBA, and the banking industry was slowly deregulated over the next two decades. The distinction between trading and savings banks was removed and banks were allowed to operate in the money market (traditionally the domain of merchant banks).
The boom and bust of the 1980s was another turbulent time for banks, with some establishing leading market positions, and others being absorbed by the larger banks. The 1990s saw the privatisation of the Commonwealth Bank, and increased competition from non-bank lenders, such as providers of securitised home loans.
Insurance
Superannuation
Financial markets
debt, equity and derivative markets
- Australian Securities Exchange
- Sydney Futures Exchange
- Newcastle Stock Exchange
- Bendigo Stock Exchange
Payments and clearing systems
There are several payment systems in use within Australia, many of which are regulated by Australian Payments Clearing Association. These payment systems include:
Cash
Cash payments are cleared and settled pursuant to the regulations and procedures of the APCA - ACDES (Australian Cash Distribution Exchange System) also called CS5.
Cheques
The cheque is still the most important non-cash payment instrument in Australia in terms of the value transferred using it each day. The number of monthly transactions in 2008 was 33.7 million with a value of $139.3 billion[2].
Cheques and other payment instruments (such as travellers cheques and warrants) are cleared and settled pursuant to the regulations and procedures of the APCS also called CS1.
Cheques payments make use of the BSB codes to identify the bank and account to debit.
Direct Entry
Direct Entry is used to transfer funds between Australian bank accounts. Clearing and settling of Direct Entry is regulated by APCA under BECS (Bulk Electronic Clearing System) also called CS2.
Direct Entry uses BSB and account number to route payments. Some common uses of the Direct Entry system include:
- Setting up monthly Direct debits to pay recurring bills such as credit card bills
- Transferring funds to other Bank accounts, also known as third party transfers
- Payment of salaries
- Government tax refunds and payments
Participants of BECS exchange Direct Entry or DE files at intervals through the day. Net positions are usually cleared daily.
EFTPOS
EFTPOS and ATM transactions occur over the EFT network. Clearing and settling of EFTPOS and ATM transactions are regulated by the APCA under CECS(Consumer Electronic Clearing System) also called CS3
BPAY
BPAY is another payment system used in Australia and is not regulated by APCA.
High Value Payments
High value payments are typically more time critical and for large sums. The main high value payment systems in Australia:
- SWIFT Payment Delivery System (SWIFT PDS)
- Clearing House Electronic Subregister System (CHESS): CHESS is an automated share transfer system developed by the Australian Securities Exchange. If a CHESS transaction is selected for RTGS settlement, then an interbank request is sent to RITS via the SWIFT FIN service. Upon settlement of the gross amount across ESAs, RITS notifies CHESS, which then settles the transaction at the CHESS participant level.
See also High Value Clearing System also known as CS4.
Credit Card
Several Credit Card systems are active in Australia including MasterCard, VISA, Diners Club and American Express.
Payment systems no longer in use
Regulation
- Reserve Bank of Australia
- Australian Securities and Investments Commission
- Australian Prudential Regulation Authority
- Australian Competition and Consumer Commission
- Australian Securities Exchange
- Australian Payments Clearing Association
See also
Notes and references
- ^ Submission to the Committee of Inquiry into the Australian Financial System ("the Campbell Committee"), Reserve Bank of Australia Occasional Paper No 7, December 1979, para 1.
- ^ Cheque Payment Transactions (Monthly volume and value)
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
