In this report, the discussion has been made on the banking industry of the Australia. In the country, there are four major banks through which the Australian government can earn a certain amount of revenues. The banking industry is considered as the largest contributor of the country in terms of per capita GDP and the economic growth of the country. In this sense, the government has found several fraud cases on the basis of money laundering of some of the major banks due to improper financial planning.
That is why the Royal Commission have been established. In this report the discussion will be made also on the issue created by the fraud cases and the impact on the banking sector as well as the Australian economy.
IntroductionIn this concerned assignment, the banking sector of Australia will be discussed in the context of recent misconduct and the Royal Commission. The issue of money laundering in the banking, superannuation and financial service sector of Australia are going to discuss.
The role of the Australia government, the entrance of Royal commission and its different roles and responsibilities will be illustrated in this report. The banking industry of Australia will be discussed with the proper market structure. The issues are going to be discussed that is faced by the banking sector as well as the Australian government due to sudden misconduct and scandal. On the other hand, analyses are going to present in this assignment that illustrates the situation in the Australian economy.
Industry backgroundThe economy of the concerned nation is dependent on the banking sector; therefore, the concerned industry is considered as the economic pillar of Australia.
Australia’s banking service industry serves as the largest contributor in the economy of the concerned nation, as it provides around $ 140 billion to the GDP per year. Commonwealth bank, Westpac banking company, Australian and New Zealand banking group, and Australian national bank are the main banks of the said nation that is dominating the whole banking sector. Besides the mentioned banks, both small and large banks are existed in the concerned banking industry of Australia. The primary banks of the concerned nation are not only the largest banks in the nation; those are recognized as the world’s largest banks. The ranks are decided under the capitalization ability in the market and on the other hand, these banks are known as one of the safest banks among the top 25 banks internationally (Hargovan 2018).
The finance industry has adopted new and advanced technologies in a way to increase the performance cost. From the implementation of ATM machines (Automated Teller Machines) to adopt the AI (Artificial Intelligence) all these are the sign of adopting the new technologies for the benefits of consumers as well as for the development of the banking sector. The installation of advanced technology has reduced the human errors as there are no interventions of human required; the machine is accessing the information and conducting the instructed operation. All these improve the banking sector of the concerned nation and make it popular globally.
The banking process in the financial service sector of Australia is reliable and the process is transparent that the consumers have a clear idea of all the transactions, and other procedures. The structure and running procedure of the concerned banking sector is different than others. From its beginning, the Australian banking sector has not been restricted and does not operate under strict regulation than other banking industry. For example, in comparison with the financial service industry of the United States, the Australian Government is not restricted and limited the operations and performance of the financial performance under any act.
Market structureIn the recent times, it has been seen that the structure of Australian banking industry is changing constantly and updating itself with time and requirements. The concerned banking sector is adopting the deregulation process constantly. On the other hand, the banking sector is following privatization. Therefore, with the implementation of free regulation fee structure, the foreign banks get permission to enter in the financial market of Australia. The general retail banks are also provided a wide range of services related to financial care. The general banking sector of the concerned nation is providing general and life insurance, stock related stock brokering, and security and safety to the customers (Munir and Terry, 2018). On the other hand, the financial sector is helping in loans for both the corporate and consumers.
Though there is no limitation or regulation from the government of the concerned nation in the banking industry, however, the above-mentioned banking industry has its own regulations. Under the privatization procedure, the government of Australian has permitted the non-Australian financial sector to run the business as the corporation branches in a way to provide services to the concerned market. According to the banking regulation of the Australia, the activities of retail banking has the permission to conduct its operations with a local subordinate that is incorporated with both concerned industry.
Associated issuesIn Australia, the banking sector is considered as the pillar of the country’s economy as well as the growth of the Australian Economy. The population of the country is increasing day by day and hence the Reserve Bank of Australia has already taken several steps to maintain the banking system in an effective manner. In the country, there are many small financial institutions, different insurance companies, some big financial institutions to maintain banking service. Among all of them, there are four most important banks which are National Australia Bank Westpac Banking Corporation, Commonwealth Bank of Australia and Australia and New Zealand banking group. These are the main institutions of the banking sectors for giving the banking service to the people of the country. The regulatory system of the country is well secured and strong.
The Reserve Bank of Australia is considered as the central bank of the country and the central bank has the ultimate power to control the regulatory system with the coordination of the Australian government. However, the Australian government has faced a legal issue in terms of several types of fraud cases in the banking sectors. One of the renounced banks of the country that is NAB has identified as improper financial planning and the bank has done millions of dollars on the basis of compensation to the hundreds of clients (Telfer, 2017). It has been found by the Australian government and that is why the government of the nation has finalised to build a commission to control the money laundering case or any kind of fraud case.
The Royal Commission was established in 2017 by the coordination of the Australian government under the Royal Commission Act 1902. The commission was established for making the inquiry and the significant report on the basis of the several misconducts in the banking or insurance sectors in the country, any of the financial services industry as well as the superannuation. In this regard, the government of the nation has provided the recommendation of the Royal Commission to note down the lack of several inventions in the regulatory system. The government of the country has already produced the report that the most important banks in the country have already involved in the money laundering case or several types of scandals such as financing to the terrorism, supply the money to the drug syndicators and the ignorance of the statutory reporting responsibilities and the improper rate of foreign exchange. It definitely affects the Australian economy as well as the sustainable development of the country is such ways;
Decreasing the level of confidence of the peopleIn Australia, the government has found several scandals or fraud cases and the Australian government has found a money laundering case that a million amounts of money have banished from the National Australian Bank with the improper financial planning of the management of the bank. The NAB is considered as one of the important banks among all banks and it is also considered as one of the safest banks in the country. However, the fraud case has been noticed at the time of inquiry by the government. In this sense, it has created a negative impact on people’s mind. The people again felt to think before depositing any certain amount of money in the banks. The people were frightened to deposit the money and the banks were facing an inherent problem due to the significant loss of the certain numbers of depositors. Due to the sudden scandals, it affected a lot to the common people. They were thinking about the loss of money. In this scenario, the banks have faced a serious problem due to the loss of certain amounts of depositors because of the confidence level of the depositors in the economy has been seen as declining.
The lower number of savings or investmentFor several fraud cases and scandals, the banking industry has faced a serious issue that the numbers saving has decreased day by day. They have felt that that the bans are not secured due to the improper policy and financial planning. That is why the numbers of depositors have decreased day by day. For this specific reason, the overall industries of the country have faced a financial crisis due to improper policies of the banking sector. The people of the nation have avoided for depositing the money into the savings account and they have also avoided making any type of certain investment in the banks (Hargovan, 2018). Thereby, the banking industry has faced an overall loss regarding the increase of the per capita GDP of Australia. The investment or the savings are considered as the identical term in the economy that is why it has failed to produce significant numbers of revenues for the Australian government.
Left shifting of the AS of the banking sectorAs there is an identical relation between the investment and the savings, it affects the aggregate supply of the banking industry. The AS curve has the tendency to shift to the leftward and the price of the products has increased at that time. In addition to the rate of inflation has gained because of the lower rate of investment to the banking industry.
In Australia, the banking sector of the country has considered as the largest contributor to the national growth of the economy. The banking industry has also contributed to the largest market share among all the industries. The banking industry has enabled to gather almost $141 billion in the GDP of Australia over the last year (Reserve Bank of Australia. 2019). In this regard, it is to be noted that the banking industry of the country has noticed as one of the important credentials on the basis of the economic growth of the country. On the other hand, the banking industry has the ability to secure a higher rate of employment and in the present scenario, the sector has the ability to provide maximum employment and the sector has secured 460000 employments (Reserve Bank of Australia. 2019).
The Australian government has a strong regulatory system and the banking sector is considered as the profitable sector in the nation. In a sudden inquiry, the Australian government has found several scandals on the basis of money laundering due to improper policy as well as improper financial planning. The people of the country have found less interested to invest the money in the banking sector due to less confidence level for depositing in the banking sector (Munir and Terry, 2018). In this scenario, the numbers of investors have been lower due to the improper policies of the bank the improper financial planning. Apart from this, the banking sector of the country has gathered fewer amounts of revenues due to the certain loss of the depositors or the investors. In the above figure, it is shown that the market share of the four biggest banks in the country. As per the figure, it indicates that the market shares of all four banks are going down in a significant way due to the money laundering case.
In the above figure, it is shown that the market share of the major banks of the country is almost accumulated 80 per cent of the total market share. That means the banking sector has a significant area in terms of generating the revenues and the growth of the Australian economy (Abs.gov.au. 2019). On the other hand, due to the certain loss in the banking sector, the market share has definitely gone down, and the banking sector has faced a financial crisis due to the loss of the investors or the depositors.
In the Australian economy, the banking industry of the country has generated secure growth as per the per capita GDP of the nation. The rate of economic growth of the nation was significantly higher before the scandals happened in 2017 (Abs.gov.au. 2019). After 2017, during a sudden inquiry the Australian government has found the scandals and different fraud cases. In this scenario, the people of the country have less focused to make an investment in the banking industry. However, the only thing has helped the Australian government that is the increasing rate of the population (Brody, 2018). The rate of population of the country has gained in a significant way that is why some people of the nation have provided the interest to invest in the banking industry of the nation. Thereby, the rate of growth in GDP has down however not as much expected by the Australian government.
Government policyThe money laundering scandal is a critical and sensitive issue for the Australian banking industry. The Australian Transaction Reports and Analysis Centre (AUSTRAC) have worked associated with both the Australian Government and banking industry. Royal Commission is implemented by the government of the concerned nation to assess the situation and take the lead for further actions (Peisah et al. 2016). Regulation has been changed and some new policies are adopted for the financial industry of Australia. For monitoring the regulation, AUSTRAC acted with both Anti-Money Laundering and Counter Terrorism Financing Act 2006, which is known as AML/CTF Act. The concerned commission has taken required action and implements it in necessary in the section of breaches of the act.
With the implementation of AUSTRAC, there are several advantages is noticed in the banking sector, the concerned industry is recovered itself after the scandal. The financial intelligence of the concerned commission has played a huge role in investigation through multi agencies that mainly focus on the money laundering issue, and the criminal networks regarding tax networks. The AML/CTF regime of the concerned nation improves the economic stability in the banking industry (Salim et al. 2016).
ConclusionIn this concerned assignment the Royal Commission of Australia has been discussed in the context of money laundering scandal. The misconduct leads to the huge loss of the banking industry as well as the consumers. On the other hand, the Australian Government has affected due to the issue as the banking industry contributes a huge part in the Australian economy. Therefore, in this concerned report, the background of the banking industry is described with the proper marketing structure. The issue that has been faced by the banking sector as well as the concerned nation is illustrated in this assignment such as the security issue, disbelief of consumers. On the other hand, the policies that are taken by Australian Government after the scandal are mentioned in this report.
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