An Overview of the Financial Sector

Flashcards about the Financial Sector

What are the main types of ADIs (authorised deposit taking institution)?

Banks, Building societies, Credit unions, and Other (capturing ADIs that do not fall within any of the previous category types).

Who regulates ADIs in Australia?

All ADIs are licensed and prudentially regulated by APRA and regulated as companies by ASIC.

What are the key roles of the Reserve Bank of Australia (RBA)?

Monetary Policy, Systemic Stability, Payments Systems Regulation

What are the key roles of the Australian Prudential Regulation Authority (APRA)?

Prudential Regulation of Deposit taking institutions, Life & General Insurance, and Superannuation

What are the key roles of the Australian Securities & Investments Commission (ASIC)?

Market Integrity, Consumer Protection, Corporations

What is a bank?

A firm that is licensed to accept deposits and make loans.

What services do banks provide?

Provide a wide range of financial services to all sectors of the economy, including funds management and insurance services.

What products and services do ADIs offer?

Transaction accounts, Term deposits, Home loans, Other loans, Credit cards

What is the primary goal of a bank?

Maximize the long-term wealth of its stockholders.

What are the four functions that monetary institutions perform?

Create Liquidity, Lower the cost of lending and borrowing, Pool risks, and Make payments

What is a liquid asset?

An asset that can be easily, and with certainty, converted into money.

How does a bank create liquid assets?

By borrowing short and lending long.

How does a bank pool risk?

By lending to a large number of businesses and individuals.

What payment systems do banks use?

The cheque-clearing system and the credit card payments system.

What was the objective of the Basel III capital and liquidity framework?

To improve the resilience of the banking system.

What are the three key areas of APRA's macroprudential policies?

Tighter LVR restrictions, strengthened loan serviceability, and increased regulatory capital requirements.

What is a central challenge facing banks, as examined by the Royal Commission?

To address issues stemming from their culture and instances of misconduct.