Overview Of Banking Industry In Australia: History, Regulation, And Future - Essay.

Brief history of Australian banking industry

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In the starting of the 19th century the first bank was set up in Australia. From then till today there has been large number of reforms in this regard. In this 21st century technology has taken the reigns in its hands and all the operations are managed on the technical line. There are four big banks in Australia today on which the four pillar policy was framed that prevents merger of these banks with each other. These banks are Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited and Westpac Banking Corporation. These are the top banks in Australia nd dominates the overall banking sector. The importance of the banks over the past years has increase and baks today are contributing more than half of the total assets of the economy. Apart from providing basic services to the consumers that is lending of money, and management of deposits, they provide large number of other services also today that ranges from fund management to asset management. They also provide insurance related services to the consumers and also big companies. These banks are required to follow the rules and regulations that have been set up by the law framing body of the country and all the actions must be in line with the same. The strong financial position that the banks hold today reflects the changes that has occurred in the overall banking sector from the time when the first bank was set up in the 19th century. Today there are as many as 53 banks operating in the Australian financial sector (Adapa & Roy, 2017). None of these banks are held by the government, few of them are owned by foreign parties and 14 banks are owned by the Australian. The government is not allowed to hold any bank to prevent them from controlling the economy. The banks are forced to follow the regulations that have been set up the Australian Prudential Regulation Authority (APRA). These banks holds  a large amount of market share and that is thus controlling the overall economy in some way or the other. The overall analysis of these bank, from the past to their future presence is discussed in this report briefly. The key regulating parties of the banking sector includes the RBA, the APRA and the ASIC. They frame rules and regulations on which the banking system works. They issue guidelines which is mandatory for all the banks to follow. Any company who wants to function in Australia needs to have the permission of the APRA and then only they can begin their overall operations.  These standards that are set by these institutions follows a large number of topics that relates to capital adequacy, management of the funds, securitization, maintain proper quality credits and many other. They set down limitations that the banks have to follow, and in case the consumers are not happy they can launch their complaints to the respective authorities. If the banks do not comply with these provisions, then their license can also be cancelled. So in order to avoid the same, these rules must be strictly followed and all the decisions of the banks should be taken keeping them in view. This helps in effective management of the accounts and make sure that there are very less amount of errors involved in the same. The inter-governmental cooperation from other parts of the world has also improved a lot. The Australian government has a very friendly attitude towards its counter parties in other parts of the world. All these countries believe in forwarding a helping hand as and when needed. The Australian government stands for better harmonization of relationship in the Asian pacific region.This helps in better development of the world relationship and also open new business opportunities for these companies and also the economy is also benefited. It opens the option of third party funding which the banks can secure from other companies that are operating in foreign land and in times of recession it is of great help.;

Dominant players in the Australian banking industry

The first bank was framed in the early 19th century. By the end of the late nineteenth century during the Victorian era, when there was a situation of huge depression, a large number of colonial banks failed. This was a huge blow to the banking sector. A new legislation was framed in 1901, to supervise these banks and protect them, and manage their overall operations. New rules and regulations were framed after the Second World War. The government was not allowed to own any of these banks. People assumed that if government had the power to control the banks than they might be able to control the overall economy also. In order to fight the same, strict guidelines were framed to control the overall banking sector and provide the people a basis on which they can judge the performances of these banks. However as there were many changes in the overall scenario of the world banking sector, deregulation became the order of the day and many changes were brought in. It made the need of stronger norms more evident and clear for these banks (Anginer & Kunt, 2014).The overall banking balance sheet has grown at an average rate of 13 percent since 1985. It is a reflection of the strong effect of the banking regulation on the economy and the presence of the strong demand and supply effect of the economy. The overall banking scenario was very badly hit because of the great depression that occurred in the late 1990s. There was  a huge decrease in the overall banking home loan demands and that caused a lot of loss to these banking companies. But since the companies have got over depression, they are trying to make more profit and generate more revenue by getting third party funding for their banks and its management. There has been huge growth since the time common wealth banking norms were issued on the basis of world banking rules. The growth has been spread over a time line and is visible in the strong market position that these banks hold in today’s time and the overall effect that they have on the economy of the company (Arnott, et al., 2017). There was no influence from the government also, as they were not allowed to control these banks and hence the overall function was dynamic and stable. This was the past of the banking industry in Australia and since then a lot of it has changed and the same is stated below.

Regulations governing the Australian banking industry

There has been huge growth and development in the Australian banks since 1990. There has been introduction of Automatic Teller machines and other devices that helped in infusing the technology with the everyday banking services. This was very helpful for the customers. Deregulation became the order of the day in 1960, and affected a large number of banks very badly. In 1980, new banks were established and there was fresh innovation and development. There were a lot of reward that were associated with the overall deregulation as it allowed many credit unions and budding societies to become banks without going into mutation. The government of Australia had launched the four pillars policy as per which the top four banks were not allowed to merge with each other and had to maintain their individual status. This was extremely helpful in the long run and made sure that the power was not transferred to a single banking company. The government was not given any power and was not allowed to control these banks in anyways. The last government owned bank was old out in 2011, and after that these banks were privatized. Strict guidelines were issued for the same to be followed by these banks.

The present banking sector is dominated by the top four banks that hold most of the market share and contribute the most to the economy. They are guided by the four pillar policy by which they are not allowed to merge with each other but they can merge with other banks and small institutions. These acquisitions and mergers have helped in the growth of these banks all over and also in improving their overall market share. They are extremely huge and as per the world banking ranks, they are together ranked at 80th position and in case of the market share they have a 50 rank. They contribute 100 percent to the total share of the GDP and have around $960billion of assets that are reflected in their books in combination. Their pre-tax income is around 21 percent and over the years they have been extremely profitable. Apart from providing normal banking services, the major source of income of this bank comes from non routine activities like asset management and fund management. There is few other banks also there apart from these top banks whose main area of focus is the management of the retail sector and hence are often known as regional banks (Bakir, 2017).These regional banks are a group of five banks that are owned by the Australian. Over the years they have tried to bring a large amount of changes in their functioning by providing better services to the customers at discount. They together contribute to around 8 percent of the total Australian GDP.

Anticipated changes in the future of the Australian banking industry

Apart from all these, there are few banks that are owned by foreigners, they contribute to around 20 percent of the total GDP. Previously these banks tried to focus on the sale of services and failed very badly. But now apart from focusing on the whole sale market, they are trying to indulge in providing better retail oriented services to the consumers at very low prices. The largest owned foreign banks makes a contribution of around 2.5 percent to the total economy and is also the eight largest domestic bank in Australia. The major activities of these banks include fund management and insurance but they also indulge in other type of activities also that will help them in generating funds. Till today, there are around 53 banks that are functioning in the Australian economy and none of these banks are owned by government officials. This makes the overall banking system very strong and reliable (Dowding, 2017).

Now if we go for the future banking system, there are several changes that are anticipated to occur that will make the overall system more strong and efficient. These few changes are

• To infuse the overall work done with the cultural aspects of the economy
• To bring more changes with regard to new innovations and development
• To optimize the overall chain value so that more revenue is generated
• To make the overall customer management system more efficient and less erroneous

 It is important for the banks to introduce all these changes in their system because in the long run it will become very important to do the same. These changes are needed so that the bugs from the banking system are removed and the entire system becomes more stable. It will be helpful to the company and also to the customers (Kohtamäki, 2017). It is important that these companies are able to able to survive this transition phase form the traditional banking system to more technological advance one. If the companies are not able to survive this phase they won’t be able to perform good. In the long run it is important that new updates should take place every now and then. These will be necessary to keep the companies in par with the other world banks and make the entire system top notch to the global level. It is important to develop better relation with the customers that will help in better management of the resources overall. It is also necessary that these banks are able to escape the future of commodity traps and don’t sell their service as they are selling some products to the people (Mayntz, 2017).These services are there to help the customers, hence commercialization is important but the overall essence of banking must always be there. This is the most important thing that the banks must keep in mind. The companies also need to improve their overall management by effectively combining their needs demands and the needs of the consumer with their resources, culture and other attributes. These are few of the basic changes that might be required in the future. As of now the banking sector is a growing economy and with changes in technology and overall procedures better changes will occur, that will make the system more efficient.

So on the basis of the above analysis it can be said that the main need of these companies is to not commercialize the services and provide quality services to the consumers. The consumers must be given their dues accordingly and must be provided the best service that will help in their growth and development. It is important that these companies are able to able to survive this transition phase form the traditional banking system to more technological advance one. It is important to develop better relation with the customers that will help in better management of the resources overal (Trieu, 2017). New technological advances must be done to make the entire process more easy. It is also important to see that there must be simplification of the banking processes so that the customers are able to understand it easily and deal with the same without issues. Proper audit of the banking companies must be done as per the stated rules and regulations so that people are aware of the true picture of the financials of the company. They can take their important decisions on the basis of the same.

Conclusion

After the entire analysis it can be concluded that the banking system in Australia ahs improved a lot over the years. There has been huge growth from the first bank that was formed in 19th century till today. It will be ok for the banking companies to make sure that retain their current position and bring it new changes so that the future is better. The banking companies must be operated independently and the government should also see to it that the overall norms that it has framed for the same must be free from all kind of errors. The customers instill their faith in these banking companies and thus it is their responsibility to provide them the best services (Yates, 2017). The present scenario in respect to these banking companies is bright and with few changes the companies will be able to improve a lot and will be to inculcate more changes in the system. The government should see to it that there is more growth of domestic banks rather than foreign owned banks and that there are steps taken for the betterment of the same. Overall the banking system is effective and strong and free from errors.

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