Banks of Australia

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Contents 1 History 1.1 Deregulation of the banking industry 2 Current situation 2.1 The four major banks 2.2 Other retail banks 2.3 Foreign banks 2.4 Industry regulation 3 See also

[edit] History

Historically, the Banking industry in Australia was tightly regulated. Until as recently as the 1980s, it was virtually impossible for a foreign bank to establish branches in Australia; consequently Australia had very few banks when compared with such places as the United States or Hong Kong. Moreover, banks in Australia were divided into two distinct categories, known as saving banks and trading banks. Saving banks paid virtually no interest to their deposits, and their lending activities were restricted to providing mortgages. Trading banks were essentially merchant banks, which did not provide services to the general public.

Because of these and numerous other regulatory restrictions on banks, other forms of non-bank financial institutions (NBFI) flourished in Australia, such as the building society and the credit union. These were subjected to less stringent regulations, could provide and charge higher interest rates, but were restricted in the range of services they could offer. Above all, they were not allowed to call themselves "banks".

Originally the role of central bank was performed by the Commonwealth Bank of Australia, then a government-owned but essentially commercially-operated banking organization. This arrangement caused some discomfort for the other banks, and as a result the central bank function was transferred to the newly-created Reserve Bank of Australia in 1961.

[edit] Deregulation of the banking industry

The Australian financial industry began to deregulate in 1983, following the Campbell Inquiry. Apart from the general loosening of regulations on banks, the distinction between savings banks and trading banks were abolished; foreign banks could open branches in Australia more easily; and the NBFIs were allowed to offer a broader range of services.

The abolition of banking restrictions increased credit availability amid the asset price boom in the 'roaring 80s', fuelling uncontrolled credit lending and poor screening practices as banks geared up with ambitious plans to maintain competitiveness. This led many banks to accumulate enormous bad debts following worldwide collapse of asset prices in the 1990s.

Eventually many of the smaller NBFIs disappeared, while some of the largest building societies (such as St. George) officially attained the status of banks.

[edit] Current situation

[edit] The four major banks

Currently, the Australian banking sector is dominated by four major banks: Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation.

The Australian government has a "four pillars" policy that prevents mergers between the four major banks. This is long-standing policy rather than formal regulation, but it reflects the broad political unpopularity of bank mergers.

[edit] Other retail banks

St. George Bank is an emerging competitor. There are several smaller regional banks that have had a traditional regional base in one state, although most of the banks are expanding more broadly in Australia.

[edit] Foreign banks

There are only a few foreign banks with a retail banking presence. The most significant is HBOS plc of the UK, which owns BankWest. Both HSBC and Citibank Australia have a small number of branches.

Foreign banks have a more significant presence in the Australian merchant banking sector.

[edit] Industry regulation

The banks are regulated by the Australian Prudential Regulatory Authority (APRA). APRA is responsible for regulating much of the financial industry, including insurance and superannuation companies.

Statistics of banks are published on the APRA website as well as in the Reserve Bank of Australia Bulletin.

[edit] See also

• List of banks in Australia