Question:
Discuss About The Global Banking System Become Fragile Over?
The first banking institution was launched in Australia in 19th century. Since then there has been a lot of reforms in the banking sector. In Australia at present there are four banking institution that dominates the overall banking sector which are Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited and Westpac Banking Corporation. Over the years there has been an increase in the overall importance of the banks, the banks today contribute to half of the total assets of the financial sector. The banks today have diverged into a lot of sector the most important being asset management and insurance. They play the most important role in the overall financial sector and holds the most of the financial assets of the country. The banks provide a lot of services to the consumer from the normal lending activities to deposit taking to other advanced services like asset management, insurance, brokerage, management of the financial markets etc. From the first bank that was opened in the 19th century till today there has been huge development and growth and the same can be seen in the strong position that the banking company holds in the financial sector. At present there are as many as 53 banks that are functioning in Australia and out of them 14 banks are owned by the Australians (Bakir, 2017). There are no banks in the country that are owned by the Australian Government, the last share of the same was sold out in 2011. The banks that are present now are supervised by the Australian Prudential Regulation Authority (APRA). There has been huge growth in the banking sector and the same is reflected in the market share of these banks. A brief history of these banks and their overall current position is given below.
The first Australian bank was opened in the 19th century as already stated above. To the end of the nineteenth century during the great depression, a large number of banks colonial banks failed. In 1901, a legislation was formed to supervise these banks, a central bank was formed and also it became a common wealth responsibility to manage these banks. After the second world war there were new rules framed. People were of the opinion that if the government was handling and controlling these banks then they also had the power to control the economy. To fight the same, new and strict banking rules were framed to guide the overall lending and credit facilities. The RBI was framed as the central bank which was given the responsibility of managing all the other banks. However with the change in the overall world trends, there was shift in the overall banking thoughts and deregulation became the norm of the season. Following that there were further many changes in the overall banking facilities of the world and it was also determined that stronger norms need to be developed. There has been a very fast growth in the overall banking balance sheet, at an average rate of thirteen percent since the end of the 1985. It reflects the overall demand and supply factors that exists in the economy and the overall effect that it is having on the banking sector and its regulations. During the 1990s recession the banks were one party that was very badly hit, and there was also huge decrease in the overall banking loan facility. The overall foreign funding since the time of recession has improved, with people trying to get third party brokers that can help them in generation of funds that they can employ in their business. After the establishment of the common wealth norms for the management of the overall banks, they have seen that there has been huge increment in the overall banking management. The growth has been supported by strict banking policies and norms. The government was not allowed to control the banking institutions; hence the economy was also not in their hands.
The key parties that regulate the overall banking scenario include the RBA, the APRA and the ASIC. These parties are mainly responsible for framing the rules and regulations that will help in maintain the stability in the banking system. If any company fails to abide by the same then they can be penalized. Before beginning their operations in Australia every Company needs to have the permission of the APRA. Even the foreign owned banks are required to follow these guidelines. These standards are basically set to regulate a large number of operations that are related to the overall capital adequacy, management of the funds, securitization, maintain proper quality credits and many other. If people are in any case not happy with the services of the banks or they have any complaints then they can improve these authorities to take the necessary action. These institutions set the limitation to the banking industry and make it more stable and prevent malfunction in operations. The licenses of the banks will be canceled if they do not comply with the provisions of the banking rules. It is important that all the rules related to the banking company must be taken by keeping the same in mind. This will help in avoiding such situations and help in making system more transparent and better. It also helps in improving the inter-governmental cooperation from other parts of the world. Thus it is an important change in the traditional banking system and has made it stronger and better.
The Australian banks experienced huge amount of technological development and growth from the end of the 1969, when various automatic teller machines were installed and infusement of the information technology and its management became an important part of the banking system. By the mid of 1960, deregulation had started and that has also affected a large number of banks. In 1980s the banking sector experienced a high point when a large number of banks were established and some good acquisitions took place (Yates, 2017). There was a lot of advantages that were associated with the overall deregulation as it allowed many credit unions and budding societies to become banks without going into mutation. The Government of Australia launched the “four pillar policy” in the banking sector as per which the four major banks of Australia cannot merge with each other. However these banks are allowed to absorb small competitors that would help in their growth and development. With time there was growth in competition and that was evident from many smaller banks that were opened in Australia. However none of the banks were owned by the Australian government, and most of the banks were under the control of private parties. The last government owned bank was sold out in 2011, and after that the banks were all privatized and strict guidance rules were framed that these banks had to follow strictly.
At present there are four major banks in Australia and are guided by the four pillar policy that prevents these banks from getting merged with each other. These are the pillars of strength of the overall banking system. These banks are very large and have huge market share. As per the world rank, these banks together are ranked at 80 and in respect of the market capitalization the overall rank is 50. These banks have around $960billion of assets in their books, along with that they have contributed hundred percent to the total GDP share of the country. They have been very profitable in the past years, earning a total pre tax return of 21 percent. The major profits that these banks earn are mostly from non banking activities that includes many services like fund management, asset management, management of other resources etc. These banks have also indulged in a lot of acquisitions and ventures that has helped in their overall growth. Apart from these four banks, there are few other banks that are known as regional whose main area of focus is management of the retail banking area wise. These are a group five Australian owned banks. Over the years they have tried hard to improve their overall business by investing in other sectors and by providing discounted services to the customers. These banks collectively contribute to around 8 percent of the total market share in the banking industry of Australia.
There are also few foreign owned banks in Australia that contributes to around 20 percent of the overall banking system in the country. Before hand in 1990s these foreign banks were focused mostly on whole sale business and failed miserably. But now in the present times, they are focusing on the retail sector by providing attractive deals to the consumer and generate more money. It has been the first to provide the customer interest based saving accounts that can help them in attracting more revenue (Anginer & Kunt, 2014). The largest owned foreign bank is also the eighth largest domestic bank that contributes bout 2.5 percent to the total market share. The two major activities of these banks are insurance and fund management, but very banks are able to make profit from these non banking activities. At present there are total 53 banks that are operating in Australia and none of them are owned by the government authorities. The present situation of the banking system in Australia is very assertive where people can anticipate growth in the coming times.
There are several changes that are anticipated to occur in the future banking system owning to the present state of flux. In the coming years there are few basic changes that the banking sector needs to bring with regard to the following-
The banks that are able to do the same will be more valuable in the future than what they are today. In the present times it can be seen that the industry is looking forward to fundamental realignment. So the need of the hour for these banking companies will be to survive the transition phase and the make the changes that are required (Arnott, et al., 2017). It is very important that the banks of tomorrow become simple smaller and are connected more to the consumers. These will help the consumers and the banks in developing better relationship and will also help in better management of the resources. It is also important for the banks in the future of escape the commodity traps, and provides services that they are meant to provide. It is important to note that so many banks are treating the customers are potential product purchaser where they rae trying to sell their properties (Mayntz, 2017). This is not correct and in the long run it is important for the banks to escape the overall commodity trap. The companies need to assemble the overall capability system that refers to management of the resources, cultural attributes and other factors and aligning the same with the needs of the customer. These are the basic steps that the banking companies need to take in the future. As of now on the present pretext it can be said that the banking sector will be going more changes in the future, the overalls system will become more technology savvy. Automation will become the order to the day and there is a possibility that there will be few government regulations and more liberalization will be there in the overall banking sector This may be considered as the future of the overall banking scenario is Australia (Trieu, 2017). It can be said that the future of the banking sector seems bright if some small changes are brought in and more focus in given on the consumers rather than on the products. This is the way the banking company functions in toady time and this is required to be changed.
As stated above the banking sector needs to align its overall functions with the needs of the customer and needs to make sure that it is able to escape the commodity trap. This will help the overall business to grow. The overall proves should become less commercialized and focus should be on the fact that quality services is provided to the consumers. . So the need of the hour for these banking companies will be to survive the transition phase and the make the changes that are required. It is very important that the banks of tomorrow become simple smaller and are connected more to the consumers. This will help in improving the confidence of the public in the company (Dowding, 2017). The overall banking rules also must become less complex so that more and more companies can easily follow them and in case the deviates from the same, penalties must be levied. Proper audit of the banking company must be done from time to time to make sure that the overall financial statements are free from errors. They must reflect the actual position of the overall business functions and its stand in the market, so that it might help the customers in taking important decisions with regard to the same.
Conclusion
Hence after the entire analysis it can be said that the banking business in Australia has developed a lot. There has been so many changes that is reflected in the strong market position of the banking companies. It is important for the government to make sure that the banking companies are more liberalized and free and the overall steps that they take for the development of these banks is properly implemented. This research paper throws a light on the growth of the banking in Australia from the very initiation point, and the several changes that it has undergone over the years (Adapa & Roy, 2017). The present situation is bright, the companies are doing well and the customers have so many good banking options to choose from. The only thing that is needed that the growth of the domestic banks must be more than the foreign owned banks, this will help in the growth of the overall economy (Kohtamäki, 2017). The overall system is fine and is doing well in comparison with the present banking system in the global scenarios of the world.
References
Adapa, S. & Roy, S., 2017. Consumers’ post-adoption behaviour towards Internet banking: empirical evidence from Australia. Behaviour & Informtaion Technology, 36(9), pp. 970-983.
Anginer, D. & Kunt, A., 2014. Has the global banking system become more fragile over time?. Journal of Financial Stability, Volume 13, pp. 202-213.
Arnott, D., Lizama, F. & Song, Y., 2017. Patterns of business intelligence systems use in organizations. Decision Support Systems, Volume 97, pp. 58-68.
Bakir, c., 2017. How do mega-bank merger policy and regulations contribute to financial stability? Evidence from Australia and Canada. Journal of Economic Policy Reform, pp. 1-15.
Dowding, K., 2017. Australian exceptionalism reconsidered. Australian journal of Political Science, 52(2), pp. 165-182.
Kohtamäki, M., 2017. Real-time Strategy and Business Intelligence: Digitizing Practices and Systems. Finland: Palgrave Macmillan.
Mayntz, R., 2017. Networked Governance. s.l.:Springer.
Trieu, V., 2017. Getting value from Business Intelligence systems: A review and research agenda. Decision Support Systems, Volume 93, pp. 111-124.
Yates, J., 2017. Protecting housing and mortgage markets in times of crisis: a view from Australia. Journal of Housing and the Built Environment, 29(2), pp. 361-382.
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