Essay on Financial Institutions and Markets

1788 Words Sep 6th, 2011 8 Pages
Financial Institutions and Markets

2.1 Outline the roles of the various monetary authorities that regulate the Australian financial system. What is the role of Council of Financial Regulators?

In Australia, the role of monetary authorities is split between three independent statutory agencies with specific responsibilities in the Australian financial sector:

1. The Reserve Bank of Australia (RBA), Australia’s central bank, is responsible for monetary policy, systemic stability and the payments system;

2. The Australian Prudential Regulation Authority (APRA) is responsible for prudential supervision of financial institutions including banks, credit unions, building societies, and insurance and superannuation companies.

3.
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the stability of the currency of Australia;

b. the maintenance of full employment in Australia; and

c. the economic prosperity and welfare of the people of Australia.’

2.4 Discuss the primary functions that the RBA performs in the Australian financial system and how these relate to achieving its overall responsibilities set out in its charter.

The primary functions of the RBA are:

• The determination and implementation of monetary policy • Issuing notes • Overseeing the payments system and facilitating its operation • Acting as the government’s banker and issuing securities on its behalf • Issuing and providing the market for Commonwealth Treasury securities • Managing financial system liquidity and the government’s holding of foreign exchange

2.5 Outline the significance of the GFC for financial regulatory authorities around the world. Why has the Australian financial system suffered a lesser impact than other developed economies?

Regulatory authorities were put under extreme pressure as a result of the GFC with many believing they were not sufficiently vigilant in monitoring the performance and risk that those under their supervision were bearing. It is also apparent that the regulators did not foresee the speed with which international contagion could take hold as a result of the level of