Banking in Australia

[4] Australia's financial services sector is the largest contributor to the national economy, contributing around $140 billion to GDP a year.

[6] This is long-standing policy rather than formal regulation, but it reflects the broad political unpopularity of further bank mergers.

A number of commentators have argued that the "four pillars policy" is built upon economic fallacies and works against Australia's better interests.

[15] Collectively, Australian customer-owned banks service 4.6 million customers or 'members' (as they are mutual shareholders in the institutions), with total assets of over A$138 billion.

A number of credit unions and building societies changed their business names to include the word 'bank', to overcome adverse perceptions of smaller deposit-taking entities.

Bankwest (CBA), Bank of Melbourne, St George and BankSA are all trading names of Westpac.

Any proposed foreign takeover or acquisition of an Australian bank will be considered on a case-by-case basis and judged on its merits.

However, in practice, banks in Australia are self-regulated through external dispute resolution (EDR) schemes, the most prominent of which is the Australian Financial Complaints Authority (AFCA).

APRA is responsible for the licensing and prudential supervision of authorised deposit-taking institutions (ADIs) (banks, building societies, credit unions, friendly societies and participants in certain credit card schemes and certain purchaser payment facilities), as well as life and general insurance companies and superannuation funds.

They may be required to obtain licences under the Corporations Act 2001 or other Commonwealth or State legislation, depending on the nature of their business activities in Australia.

ASIC has responsibility for market integrity and consumer protection and the regulation of certain financial institutions (including investment banks and finance companies).

[23] Banks are also subject to obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 as "reporting entities".

There have been calls in recent times for an added level of regulation of banks following lending, foreign exchange, and financial planning controversies between 2009 and 2017, highlighted in 2016 Senate inquiries.

[31] During the course of every day, each bank executes a large number of transactions, such as payroll, retail and business purchases, credit card payments, etc.

Until July 2017 a body called the Australian Financial Markets Association (AFMA) determined the BBSW rate.

The system required some level of subjective judgement by the banks, because there was a rapidly changing market on multiple broker screens.

AFMA changed the method of calculating the BBSW rate to be based on a multimarket electronic feed of live bids and offers.

Now, the Reserve Bank Act 1959 expressly prohibits persons from issuing bills or notes payable to bearer on demand and intended for circulation.

Savings banks paid virtually no interest to their depositors and their lending activities were restricted to providing mortgages.

Because of these and numerous other regulatory restrictions, other forms of non-bank financial institutions flourished in Australia, such as building societies and credit unions.

Initially, only the banks' existing debit and credit cards could be used, but in 1985, the ATM (Financial) Network was created to link EFTPOS systems to provide access for all customers.

Prior to 1986, the Australian banks organized a widespread uniform credit card, called Bankcard, which had been in existence since 1974.

There was a dispute between the banks whether Bankcard (or credit cards in general) should be permitted into the proposed EFTPOS system.

The widespread acceptance of credit cards and the development of SSL encrypted technology in mid 1990s opened the way to E-commerce.

The change formalised the right of non-bank financial institutions – such as building societies and credit unions – to accept deposits from non-members.

Following the Wallis Committee Report, the Australian Prudential Regulation Authority (APRA) was established on 1 July 1998 to take over from the RBA the oversight of ADI's and other financial institutions in Australia, e.g., banks, credit unions, building societies, friendly societies, general insurance and reinsurance companies, life insurance and most members of the superannuation industry.

The arrival of hundreds of thousands of readily employable migrant workers under the post-war immigration scheme, coupled with intense competition amongst lenders, discouraged proper investigation into buyers.

[47] In June 2017 the Treasurer, Hon Scott Morrison MP, initiated the Open Banking Review.

[49] The framework is designed to encourage new entrants to the banking industry, particularly small firms with limited financial resources, to navigate the licensing process.

Eligible entities can conduct a limited range of business activities for two years while they progress towards an unrestricted status.