Financial System of Australia

1 Theoretical Basis of Financial System The financial system plays the key role in the economy by stimulating economic growth, influencing economic performance of the actors, affecting economic welfare This is achieved by financial infrastructure, in which entities with funds allocate those funds to those who have potentially more productive ways to invest those funds A financial system makes it possible a more efficient transfer of funds According to the structural approach, the financial system of an economy consists of three main components: 1) Financial markets; 2) Financial intermediaries (institutions); 3) Financial regulators Each of the components plays a specific role in the economy According to the functional approach, financial markets facilitate the flow of funds in order to finance investments by corporations, governments and individuals Financial institutions are the key players in the financial markets as they perform the function of intermediation and thus determine the flow of funds The financial regulators perform the role of monitoring and regulating the participants in the financial system Financial Markets: a Definition: A financial market is a market where financial instruments are exchanged or traded b Functions:  Borrowing & Lending: Financial market transfers fund from one economic agent (saver/lender) to another (borrower) for the purpose of either consumption or investment  Determination of Prices: Prices of the new assets as well as the existing stocks of financial assets are set in financial markets Determination of prices is major function of financial market  Assimilation and Co-ordination of Information: It gathers and co-ordinates information regarding the value of financial assets and flow of funds in the economy  Liquidity: The asset holders can sell or liquidate their assets in financial market  Risk Sharing: It distributes the risk associated in any transaction among several participants in an enterprise  Efficiency: It reduces the cost of transaction and acquiring information It help to increase efficiency in financial market c Financial Instruments  Definition: Financial instruments are tradable assets of any kind They can be cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument  Types of instrument: Structure of Financial Market: d Financial markets can be categorized as follows: Debt and Equity Markets i  Equity markets: A market where ownership of securities are issued and subscribed is known as equity market  Debt markets: The market where funds are borrowed and lent is known as debt market Arrangements are made in such a way that the borrowers agree to pay the lender the original amount of the loan plus some specified amount of interest Primary and Secondary Markets ii  A primary market is a financial market in which new issues of a security, such as a bond or a stock, are sold to initial buyers by the corporation or government agency borrowing the funds  A secondary market is a financial market in which securities that have been previously issued can be resold iii Exchanges and Over-the-Counter Markets  Exchange is a place where buyers and sellers of securities meet in one central location to conduct trade  Over-the-counter (OTC) market is a place in which dealers at different locations who have an inventory of securities stand ready to buy and sell securities “overthe-counter” to anyone who comes to them and willing to accept their prices Money and Capital Markets iv  Money market is a financial market in which only short-term debt instruments (generally those with original maturity of less than one year) are traded  Capital Market is the market in which longer-term debt (generally those with original maturity of one year or greater) and equity instruments are traded Financial Intermediaries: a Definition: Financial intermediary is a special financial entity, which performs the role of efficient allocation of funds, when there are conditions that make it difficult for lenders or investors of funds to deal directly with borrowers of funds in financial markets Financial intermediaries include depository institutions, insurance companies, regulated investment companies, investment banks, pension funds b Functions of Financial Intermediaries:  Reduce transaction costs Financial Intermediaries can substantially reduce transaction costs because they have developed expertise in lowering costs and because their large size allows them to take advantage of economies of scale  Promote Risk Sharing Financial intermediaries can help reduce the exposure of investors to risk, that is, uncertainty about the returns investors will earn on assets Financial Intermediaries this through risk sharing Risk sharing is risk management method in which the cost of the consequences of a risk is distributed among several participants in an enterprise, such as in syndication The process of risk sharing is further augmented through diversification of assets (portfolio-choice), which involves spreading out funds over a portfolio of assets with different types of risk  Reduce Asymmetric Information: Adverse Selection and Moral Hazard Financial intermediaries can alleviate adverse selection and moral hazard problems, enabling them to make profits c Types of Financial Intermediaries:  Depository institutions accept deposits from savers and transform them into loans (Commercial banks, savings and loan associations, mutual savings banks and credit unions)  Contractual savings institutions acquire funds at periodic intervals on a contractual basis (insurance and pension funds)  Investment intermediaries serve different forms of finance They include finance companies, mutual funds and money market mutual funds Regulation of the financial system The government regulates financial markets for three main reasons: to increase the information available to investors, to ensure the soundness of financial system and to improve control of monetary policy Regulations include requiring disclosure of information to the public, restrictions on who can set up a financial intermediary, restrictions on what assets financial intermediaries can hold, and the provision of deposit insurance II Reality of Financial System in Australia Australian Financial Markets: The main participants in the Australian financial market are:  Australian Securities Exchange is the primary stock exchange in Australia, and  National Stock Exchange of Australia, based in Newcastle, NSW, previously called Newcastle Stock Exchange The 2014-15 financial year saw the return of asset price volatility in global and domestic financial markets, driven by offshore macroeconomic and geopolitical developments as well as structural changes in market structure, regulation and liquidity Turnover across Australia’s financial markets rose 8% over the year to a total of $136,368 billion Overthe-counter markets recorded a 7.7% increase in turnover to $84,817 billion Exchangetraded markets turnover rose nearly 9% to $51,552 billion Financial markets are an essential link in the chain of production that is our national economy Australia’s experience over many years is that efficient and well-managed financial markets promote a productive and competitive economy The securities markets are a vital source of finance to business, help fund national infrastructure development and enable governments to finance budgets over the economic cycle Australian companies and investors use derivatives to manage the financial risks that are inherent in a modern and internationally open economy Turnover across Australia’s financial markets rose by 8% to a total of $135,208 billion in comparison with the 2013-14 year Over-the-counter markets recorded a 7.7% increase in turnover to $83,656 billion Exchange traded markets turnover rose nearly 9% to $51,552 billion Over-the-counter markets: The Reserve Bank of Australia (RBA) followed its offshore counterparts and resumed its easing cycle in the first half of 2015, with interest rate cuts in February and May, taking the official cash rate to a record low of 2.00% Inflation remained subdued, ending the year with an annual rate of 1.5% The unemployment rate ended the financial year where it began at 6.1% in both trend and seasonally adjusted terms The Australia–US 10 year bond spread narrowed to levels not seen since the early 2000s, reflecting divergent expectations for Australian and US monetary policy and Australian economic underperformance, with a re-test of parity seen as a possibility for 2015-16 Total Australian Commonwealth Government Securities (ACGS) on issue rose from $319.5 billion to $370 billion as the federal government continued to run large budget deficits, now larger as a share of GDP than in the US Issuance is not expected to peak until around 2018- 19 at around $540 billion Exchange-Traded Markets: Australian equities participated in the continued global rally from the post-financial crisis lows of 2009, but underperformed US and other equity markets The S&P/ASX 200 posted a modest gain of 1.2% over the year, although it rose 5.7% on an accumulation basis By contrast, US equities rose 7.4% on an accumulation basis The S&P/ASX 200 VIX index trended higher throughout the year, reflecting increased global equity market volatility on the back of concerns about a possible Greek sovereign debt default, geopolitical tensions in Eastern Europe and emerging market volatility Total value traded across ASX and Chi-X peaked at a daily average of $6.1 billion in May 2015, the highest seen since August 2011 Total equity market turnover rose 14% to $3.679 billion Australian Financial Instruments: MONEY MARKET INSTRUMENTS: a Bank Accepted Bills: Bank Accepted Bills of Exchange (BABs) are negotiable short term securities issued by trading banks used to affect short-term financing for periods typically between 30 and 180 days The Bank will only sell customers bank accepted bills that have been accepted by a prime bank b Negotiable Certificates of Deposit: Negotiable Certificate of Deposit issued by a bank other than the Commonwealth Bank of Australia (Non-Commonwealth Bank NCD) is an investment in an underlying security being a negotiable certificate of deposit (NCD) where the term of the security is generally for a period of day to years The underlying security is issued by a bank other than the Commonwealth Bank of Australia The interest rate applicable on a Non-Commonwealth Bank NCD is determined on the deal date by reference to prevailing market interest rates and is fixed for the term of the investment A Non-Commonwealth Bank NCD entitles the person in possession of it to payment, by the issuing bank, of a specified sum of money (face value) on a particular date (maturity date) NCDs are discount securities meaning they are issued and on-sold to investors at a discount to their face c Treasury Notes Treasury Notes (T-Notes) are a short-term discount security redeemable at face value on maturity As such this security provides the purchaser with a single payment on maturity Terms are generally less than six months Treasury Notes are issued to assist with the Australian government’s within-year financing task d Commercial paper (Promissory Notes) Commercial paper, also called promissory notes or one name paper in the professional market - is a written promise to pay a specified sum of money to the bearer at an agreed date It is usually issued for terms ranging from 30 to 180 days and is sold to an investor at a simple discount to the face value A promissory note is different from a bill of exchange in that it is not ‘accepted’ by a bank and is not endorsed by the parties which sell it in the market place In Australia, promissory notes are governed by the Bills of Exchange Act (1909) e Repurchase Agreements A repo is an agreement between two parties under which one party sells a security to the other, with a commitment to buy back the security at a later date for a specified price The difference between the sale and repurchase price reflects the rate of interest to be earned by the cash provider While repos are similar to secured loans in an economic sense, a fundamental distinction is that title to the security passes to the cash provider for the duration of the repo The standard legal documentation for repo trading, both in Australia and internationally, is a Global Master Repurchase Agreement (GMRA) b.6 Public Unit Trust Public unit trusts - are investment funds open to the Australian public Their operations are governed by a trust deed which is administered by a management company Under the Managed Investments Act 1997 (Cwlth), the management company has become the single responsible entity for both investment strategy and custodial arrangements; the latter previously had been the responsibility of a trustee These trusts allow their unit holders to dispose of their units relatively quickly They may sell them back to the manager if the trust is unlisted, or sell them on the Australian Stock Exchange (ASX) if the trust is listed While public unit trusts are not subject to supervision by APRA or registered under the Financial Statistics (Collection of Data) Act 2001 (Cwlth), they are subject to the provisions of corporations law which includes having their prospectus registered with ASIC Common funds - are set up by trustee companies and are governed by state Trustee Acts They allow the trustee companies to combine depositors' funds and other funds held in trust in an investment pool They are categorised according to the main types of assets in the pool, for example, cash funds or equity funds b.7 Cooperative housing societies Cooperative housing societies - are similar to permanent building societies In the past they were wound up after a set period, but now are continuing bodies They raise money through loans from members (rather than deposits) and provide finance to members in the form of housing loans Over recent years many cooperative housing societies have originated mortgages on behalf of securitisers b.8 Investment companies Investment companies - are similar to equity trusts in that they invest in the shares of other companies However, investors in investment companies hold share assets, not unit assets Fund managers, insurance brokers and arrangers of hedging instruments - are classified as financial auxiliaries as they engage primarily in activities closely related to financial intermediation, but they themselves not perform an intermediation role b.10 Wholesale trusts Wholesale trusts - are investment funds that are only open to institutional investors - life insurance corporations, superannuation funds, retail trusts, corporate clients, high net worth individuals due to high entry levels (e.g $500,000 or above) They may issue a prospectus, but more commonly issue an information memorandum Only those which invest in financial assets are included in table below Table below shows the financial assets held by financial intermediaries not elsewhere classified Source: ABS Assets and Liabilities of Australian Securitisers c Regulation of Financial System in Australia: Responsibility for the regulation and supervision of the Australian financial system is vested in four separate agencies:     The Australian Prudential Regulation Authority (APRA); The Australian Securities and Investments Commission (ASIC); The Reserve Bank of Australia (RBA); and The Australian Treasury These four bodies comprise the Council of Financial Regulators (CFR) The Australian Prudential Regulation Authority (APRA) oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurance, friendly societies and most members of the superannuation industry APRA is funded largely by the industries that it supervises APRA operates under laws determined by the Australian Parliament Among other things, these laws grant APRA the power to set prudential standards that underpin its supervisory approach towards supervised institutions For the deposit-taking, insurance and superannuation industries, APRA has developed a comprehensive framework of prudential standards and prudential practice guides to promote sound financial and risk management, and good governance In the superannuation industry, APRA also administers regulations and operating standards put in place by the Australian Parliament APRA’s prudential standards set out minimum capital, governance and risk management requirements, which are legally binding Prudential practice guides provide guidance on how supervised institutions might satisfy the prudential standards ASIC regulate Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit As the consumer credit regulator, ASIC license and regulate people and businesses engaging in consumer credit activities (including banks, credit unions, finance companies, and mortgage and finance brokers) ASIC ensure that licensees meet the standards – including their responsibilities to consumers – that are set out in the National Consumer Credit Protection Act 2009.As the markets regulator, ASIC assess how effectively authorised financial markets are complying with their legal obligations to operate fair, orderly and transparent markets ASIC also advise the Minister about authorising new markets Stability of the financial system is a longstanding responsibility of the Reserve Bank – a mandate reconfirmed by the Government when it introduced significant changes to Australia's financial regulatory structure in July 1998 These included the transfer of responsibility for the supervision of banks to a new integrated regulator, the Australian Prudential Regulation Authority (APRA), and the establishment of the Payments System Board within the Bank The Bank also works to ensure that the payments system is safe and robust The Payments System Board within the Bank has explicit authority for payments system safety and stability, and has the backing of strong regulatory powers Internationally, the Reserve Bank contributes to the debate on the reform of the international financial system, primarily through its membership of the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS) The FSB has a mandate to assess the vulnerabilities affecting the financial system, identify and oversee action to address them, and promote co-operation and information sharing among authorities responsible for financial stability The BCBS provides the international framework for prudential regulation of internationally active banks The Treasury provides advice to the Government on a range of matters including: Economic, fiscal and monetary policy; Taxation; Public borrowing; International finance; Foreign exchange; Financial sector policy; Currency and legal tender; Foreign investment in Australia; National and occupational superannuation; Business law and practice; Corporate and securities law; Corporate insolvency; Competition policy; Prices surveillance; Excise; Census and statistics; Valuation services; Consumer affairs; Commonwealth-State financial relations III Evaluation: The total assets in the Australian financial system in 1995 were $931 billion, today this is a $1 trillion industry It finds that whilst Australia is not the worst in any particular area of our financial system, Australia is not the world's best practice in any area of our financial system – Australia is middle of the range Australia has their own strengths and weaknesses * Strenghs The strengths of the Australian financial system are the safety and prudential controls, the reliabilities in relation to the payments system, the provision of housing mortgage and competitive mortgage rates Australia is one of the few advanced economies to avoid a recession during the global financial crisis (GFC), supported by strong economic fundamentals at the onset of the crisis, a well-coordinated response as the crisis unfolded, and a mining investment boom fueled by a surge in China’s demand for commodities Five years on, both the economy and the financial sector continue to outperform most of their peers The authorities’ timely response to the fallout from the GFC, their prudent economic management, and strong supervision of the financial sector, has kept Australia on the dwindling list of AAA rated countries The principles-based and outcome-oriented supervisory approach of APRA is effective, with notable strengths in risk analyses embedded in the PAIRS and SOARS system, industry-wide risk assessments, and a focus on bank boards’ responsibility for risk management ASIC is also a highly regarded enforcer of market regulation Yet, there is some room for improvement in certain areas of supervision, such as further enhancing APRA’s formal on-site supervisory review of banks’ liquidity risk management The adequacy and stability of ASIC’s funding is crucial for it to carry out proactive supervision, so it is important to increase its core funding The Council of Financial Regulators plays a key role in coordinating financial regulation and stability issues The coordination arrangement under the Council works well, as demonstrated by the quick and appropriate response to the unfolding crisis during the GFC Given the Council’s important role, it is beneficial to further highlight its work and enhance the transparency of its deliberative processes A more explicit report of the Council’s deliberations in the Financial Stability Review would be a first step toward achieving these objectives Australia needs to more actively and effectively promote the strengths of its financial sector and the advantages to overseas investors of recent and prospective policy changes * Weaknesses It finds that the Australian financial system has weaknesses in competition for retail transaction accounts, in availability of finance for small business, in the lack of development of the corporate bond market, and lack of depth in those markets In relation to costs and profitability Australia and its financial system is again somewhere around mid-range The total cost of Australia's financial system to users is $41 billion, or 4.3 per cent of assets Of this 2.8 per cent is operating costs and 1.5 per cent goes to cover bad debts, taxes and profits Whilst this is lower than the United States and the United Kingdom it is higher than many other countries including Canada, Switzerland and Germany Australia is still heavily reliant on cheques which are a relatively high cost payment instrument A 10 per cent improvement in the efficiency of the Australian financial system would translate to $4 billion worth of savings Recent developments, including the unresolved European debt crisis, the anemic recovery in the United States, and the growth slowdown in China, suggest that the international environment will remain unfavorable for an extended period This could exacerbate the vulnerabilities of a country with a structural current account deficit The banking sector also faces challenges The prospect of higher funding costs and slower credit growth, as businesses and households deleverage and become more conservative in their borrowing decisions, may encourage banks to take on greater risks to maintain profitability McKinseys estimate that at Australian retail banking, labour productivity is up to 40 per cent behind that of the United States Banks represent the main financial institutions for small business - up to 98 per cent - and they are the main financial institutions with the widest coverage in Australia It is suggested that the cost to consumers of Australia's four major banks is better than for some overseas banks but below world's best practice Net interest margins remain relatively high Fees and charges are comparatively low IV Recommendations Historically, Australia has maintained a strong and stable financial system supported by effective stability settings However, the Australian financial system has characteristics that give rise to particular risks, including its high interconnectivity domestically and with the rest of the world, and its dependence on importing capital More can be done to strengthen the resilience of Australia’s financial system to avoid or limit the costs of future financial crises, which can deeply damage an economy and have lasting effects on people’s lives For financial institution As the banking sector is at the core of the Australian financial system, its safety is of paramount importance Australia should aim to have financial institutions with the strength to not only withstand plausible shocks but to continue to provide critical economic functions, such as credit and payment services, in the face of these shocks Adhering to international regulatory norms will help ensure Australian financial institutions and markets are not disadvantaged in raising funds in international financial markets Some suggested sollutions: -Strengthen policy settings that lower the probability of failure, including setting Australian bank capital ratios such that they are unquestionably strong by being in the top quartile of internationally active banks -Reduce the costs of failure, including by ensuring authorised deposit-taking institutions maintain sufficient loss absorbing and recapitalisation capacity to allow effective resolution with limited risk to taxpayer funds — in line with international practice These recommendations seek to ensure that Australia’s financial system remains resilient into the future, and that it continues to provide its core economic functions, even in times of financial stress These recommendations should also produce efficiency benefits, including through reducing implicit guarantees and volatility in the economy and promoting confidence and trust Australia needs strong, independent and accountable regulators to help maintain confidence and trust in the financial system, thereby attracting investment and supporting growth This requires proactive regulators with the right skills, culture, powers and funding For regulatory authority Australia’s regulatory architecture does not need major change; however, the Inquiry has made recommendations to improve the current arrangements Government currently lacks a regular process that allows it to assess the overall performance of financial regulators Regulators’ funding arrangements and enforcement tools have some significant weaknesses, particularly in the case of ASIC In addition, it is not clear whether adequate consideration is currently given to competition and efficiency in designing and applying regulation The regulatory should:  Improve the accountability framework governing Australia’s financial sector regulators by establishing a new Financial Regulator Assessment Board to review their performance annually  Ensure Australia’s regulators have the funding, skills and regulatory tools to deliver their mandates effectively  Rebalance the regulatory focus towards competition by including an explicit requirement to consider competition in ASIC’s mandate and conduct three-yearly external reviews of the state of competition  Improve the process for implementing new financial regulations  Australia should have a more focused regulatory framework; there should be increased competition and contestability in markets; that mutuals should be able to provide banking services; that the exchanges should go head to head in competition; that there should be non-bank entry into the payments system  Reserve Bank continue to provide system stability and regulate payments, but there be a single prudential regulator for licensed banks, building societies, credit unions, insurance companies, friendly societies and superannuation funds to be called the Australian Prudential Regulation Commission That would take over work currently performed by the Reserve, AFIC, the ISC and some other State agencies V Reference http://www.bcci.bg/projects/latvia/pdf/7_Financial_markets.pdf http://113.171.224.205/videoplayer/UUS2534MHYWCMGCGBB23.pdf? ich_u_r_i=9c4d47be37662e61601803c506db3348&ich_s_t_a_r_t=0&ich_e_n_d=0&i ch_k_e_y=1645048903750363472446&ich_t_y_p_e=1&ich_d_i_s_k_i_d=10&ich_u _n_i_t=1 http://www.afma.com.au/data/afmr/2015%20AFMR.pdf https://www.rjobrien.co.uk/documents/shared/rates/90_day_bank_accepted_bills_futu res.pdf https://www.commbank.com.au/personal/apply-online/download-printedforms/ADB2653.pdf http://aofm.gov.au/ags/treasury-notes/ http://www.abs.gov.au/Ausstats/abs@.nsf/glossary/5655.0 http://www.rba.gov.au/publications/bulletin/2010/dec/pdf/bu-1210-4.pdf http://aofm.gov.au/ags/treasury-bonds/ http://aofm.gov.au/ags/treasury-indexed-bonds/ https://onlineinvesting.westpac.com.au/media/80839/guide_to_exchange_traded_austr alian_government_bonds.pdf http://business.nab.com.au/wp-content/uploads/2015/06/Australian-debt-securitiesand-corporate-bonds-june-2015.pdf https://www.moneysmart.gov.au/investing/investments-payinginterest/bonds/corporate-bonds http://www.ratecity.com.au/home-loans/articles/australian-mortgage-market List of Acronyms [...]... Commonwealth-State financial relations III Evaluation: The total assets in the Australian financial system in 1995 were $931 billion, today this is a $1 trillion industry It finds that whilst Australia is not the worst in any particular area of our financial system, Australia is not the world's best practice in any area of our financial system – Australia is middle of the range Australia has their... invest in financial assets are included in table below Table below shows the financial assets held by financial intermediaries not elsewhere classified Source: ABS Assets and Liabilities of Australian Securitisers c Regulation of Financial System in Australia: Responsibility for the regulation and supervision of the Australian financial system is vested in four separate agencies:     The Australian... transaction accounts, in availability of finance for small business, in the lack of development of the corporate bond market, and lack of depth in those markets In relation to costs and profitability Australia and its financial system is again somewhere around mid-range The total cost of Australia' s financial system to users is $41 billion, or 4.3 per cent of assets Of this 2.8 per cent is operating costs... nominal GDP for much of the previous two decades, financial system assets have grown a little slower than GDP since around 2007 The largest group of financial institutions are authorized deposit-taking institutions (ADIs), comprising banks, as well as credit unions and building societies (CUBS), which together account for nearly 60 per cent of financial system assets The share of financial system assets held... Historically, Australia has maintained a strong and stable financial system supported by effective stability settings However, the Australian financial system has characteristics that give rise to particular risks, including its high interconnectivity domestically and with the rest of the world, and its dependence on importing capital More can be done to strengthen the resilience of Australia s financial system. .. accident; sickness; or other benefits b Analyzing Australian financial institutions b.1 Banking system Four pillars Currently, the Australian banking sector is dominated by four major banks: Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bankand Westpac Banking Corporation In 1990, the Commonwealth Government of Australia announced that it adopted a "four pillars"... Strenghs The strengths of the Australian financial system are the safety and prudential controls, the reliabilities in relation to the payments system, the provision of housing mortgage and competitive mortgage rates Australia is one of the few advanced economies to avoid a recession during the global financial crisis (GFC), supported by strong economic fundamentals at the onset of the crisis, a well-coordinated... resilience of Australia s financial system to avoid or limit the costs of future financial crises, which can deeply damage an economy and have lasting effects on people’s lives 1 For financial institution As the banking sector is at the core of the Australian financial system, its safety is of paramount importance Australia should aim to have financial institutions with the strength to not only withstand plausible... number of foreign subsidiary banks, however only a few have a retail banking presence; HSBC Bank Australia, Bank of Cyprus Australia Limited, Beirut Hellenic Bank and Citibank Australia have a small number of branches Foreign banks have a more significant presence in the Australian merchant banking sector b.2 Building societies In Australia, building societies evolved along British lines Because of strict... billion and the Australian Bond Market, including financial and asset backed issuance, sat at $474 billion dollars Despite this, the total size of the Australian Corporate Bond Market remains at $50 billion – compared to the Australian equity market which has a total market capitalisation of over $1.5 trillion Figure 2 provides an overview of the size and growth of the corporate bond market in Australia ... assets financial intermediaries can hold, and the provision of deposit insurance II Reality of Financial System in Australia Australian Financial Markets: The main participants in the Australian financial. .. worst in any particular area of our financial system, Australia is not the world's best practice in any area of our financial system – Australia is middle of the range Australia has their own strengths... Regulation of Financial System in Australia: Responsibility for the regulation and supervision of the Australian financial system is vested in four separate agencies:     The Australian Prudential