StudentShare solutions
Triangle menu

Australian Financial Institutions and Markets - Essay Example

Not dowloaded yet

Extract of sample
Australian Financial Institutions and Markets

While banks are the major asset holding financial institutions in Australia there are other major players in this arena. The increase the economic power of the banks and deregulation of the 1980's has increased the market share over other financial institutions such as NBFI's(non-bank financial institution), super funds, and other managed fund accounts (Lewis and Wallace 1997, 76). According to Wallace (1997,77) there are 3 major reasons for these changes. "Large banks have an advantage in competition, Australian banks have significant advantages in the form of customer loyalty and extensive branch networks, with the record profits in the industry the banks have access to increasing amounts of capital and finally many of the newer banks in the industry had no clear strategy when they entered the market, giving the big 4 an advantage." Now that banks have come into the market they are competing on several different levels with other financial institutions, "insurance companies and superannuation funds compete directly in the market for managed funds, and their products compete directly with instruments provided by the funds management arms of banks (Wallace and Lewis, 1197, 233). However as noted by Wallace and Lewis (1197, 233) life insurance and superannuation funds still comprise 80% of the managed funds sector.

2.1 Insurance
In 2002 the insurance industry in Australia held $173.9 billion in assets (Vinley 2003, 36). Insurance companies hold this large amount of assets because they have policy holders paying in monthly sums that may never be paid out or are paid out in smaller sums than were paid in. Insurance companies then use these assets to make money in financial markets through managed funds. Australian banks have sought to enter the insurance market and compete with the existing firms. According to the Wall Street Journal(2005,1), Commonwealth Bank, one of the big 4 banks in Australia recently reported a 50% gain in first half profit which was a result of their wealth management business and a steady result from their insurance arm. The ability of banks to expand into other financial services has affected the insurance industry as the Big 4 banks in Australia now compete with them. The insurance industry has now also begun to move into the domain of other financial services in order to maintain their asset base. Vinley (2003, 36) points out that insurance companies have seen a "decline in assets, but this has been offset by significant increases in their managed funds operations, particularly superannuation. The percentage share of superannuation assets has increased to 14.5 % from 1990-2002."

2.2 Superannuation
In Australia, superannuation is paid into the funds by employer contributions under the Superannuation Guarantee Charge and by individuals as voluntary contributions (Frino 2005, 2). Superannuation funds make their money by charging small fees for asset management as well as making returns by investing the large amount of assets they have. As stated before insurance companies are now creeping into the superannuation market, but so are Australian banks. They have become one stop shopping for customers in the ...Show more

Summary

Australian banks have been a recent success story in the overall economy with financial deregulation and expansion of banks into other services spurring their recent growth. In 2004 the Australian Finance Industry made up 8.5% of the added value to the economy, generated over $62 billion dollars, and has enjoyed a staggering growth rate of 157% since 1985 (Axiss 2005, 5)…
Author : kaden82
Australian Financial Institutions and Markets essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Australian Financial Institutions and Markets"
with a personal 20% discount.
Grab the best paper

Related Essays

Financial Markets and Institutions
According to Allen and Gale (2000, chap 1), Financial intermediaries can be broadly classified into: deposit taking institutions such as banks, credit unions, savings and savings societies; Insurance schemes such as life insurance policies; investment ventures such as retirement benefits schemes and mutual funds.
6 pages (1500 words) Essay
Financial Markets and Institutions
Financial market securities include bonds, stocks, commodities, agricultural goods and precious metals. The derivatives market is financial market for derivative instruments such as options contracts and futures contracts. The characteristic feature of derivative instrument is that the value of derivative is derived from the underlying.
5 pages (1250 words) Essay
Financial Markets and Institutions
Among the different product traded are equities, fixed income securities, derivatives and foreign exchange. This paper will focus on the foreign exchange market in the U.S. and the types of foreign exchange transactions. It will also focus on the factors affecting the interest rates, ease or difficulty of forecasting the interest rate changes, role of Federal Reserve towards the U.S.
5 pages (1250 words) Essay
Financial Markets and Institutions
Both developed and developing countries have faced the severity of the consequences of this crisis. While the crisis had taken shape, economists, politicians and researchers were concerned about the causes that triggered a crisis of such a dimension. Although it was quite late and the crisis was already in full swing, researchers claim that prior signs were visible about the occurrence of the crisis.
8 pages (2000 words) Essay
Financial Markets and Institutions
This paper will define what financial markets and institutions are and their implication in an economy particularly in a largely consolidating world market. Financial markets "consist of agents, brokers, institutions, and intermediaries transacting purchases and sales of securities." The individuals and institutions operating in the financial markets are linked by contracts and communications networks that form an externally visible financial structure, laws, and friendships.
10 pages (2500 words) Essay
Financial markets and institutions
Poorly developed financial markets and institutions impose a restriction on economic development. Financial market is a system which
6 pages (1500 words) Essay
Financial Institutions & Markets
US economy, forced banks to incur billions in losses, and latter spread to the UK causing near bankruptcy of Northern Rock in Newcastle that was finally nationalised in February 2008. In this paper, the effect on sub prime loans will be discussed and a closer look on its effects
8 pages (2000 words) Essay
Financial Markets and Institutions,
ediaries and institutions operating the US financial market receive savings from domestic households, business houses as well as the Federal Government and invest those savings. The role of the financial market is to invest these savings to the most resourceful investments,
5 pages (1250 words) Essay
Financial Markets and Institutions
Bonds offered by governments and local authorities are called treasury bonds, while those offered by institutions are called corporate bonds. The bonds have an interest that it pays so
2 pages (500 words) Essay
Financial institutions and markets
An OBS activity moves onto the balance sheet as an asset or liability when a contingent event occurs. An event which the bank has no control upon is the one being referred to as a contingent event. Occasionally, as far as the original agreement is
3 pages (750 words) Essay
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation