RBA和APRA描述

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FIN 1103 Financial Market S6 2011

Student Name: Ma Shengche

Student ID: 0061013934

Due Date: 11 November 2011

Words count: 1493 words

I. Functions of the Reserve Bank of Australia (RBA)

As Australia‟s central bank, the Reserve Bank of Australia has the responsibility of providing

services to the Government as well as other banks and institutions. It is one of three main

financial regulators that aim to promote the financial system‟s stability, efficiency and

reliably.

The Reserve Bank Act 1959 described that the RBA has two boards. Function of Reserve

Bank Board is to establish and implements monetary policy to maintain a stable financial

system and issues the nation‟s currency. Function of Payment System Board is to regulate the

payment system in order to control risk, promote efficiency and competition.

The RBA has the function to promulgate proper monetary policy, with the objectives of

stabilizing the currency, employment rate and economic prosperity. Its monetary policy

establishes through adjusting cash rate. Cash rate determines the interest rate among

commercial banks. In addition, it will influence inflation rate, as well as the economic vitality

(the RBA, 2011). A given example is in 1997, Australian Dollar fell rapidly. The RBA

interfered in all aspects of financial market to restrain the falling. They sold reserved foreign

currency and bought Australian Dollar. In the meanwhile, RBA stopped buying foreign

currency for the Government of Australia with the purpose of counteracting the influences of

interferences. The exchange rate of Australian Dollar finally went up. Changes in the cash

rate will affect the savings and investment behavior of individuals and businesses. All of that

will adjust the inflation rate to an expected one. For inflation rate changes, price of goods and GDP will follow to change.

As far as the payment system, the RBA is responsible for controlling risk, promoting the

efficiency and competition in the market for payment services, consistent with the overall

stability of the financial system. The payment system is divided into wholesale and retail

payment orders. The RBA has the function to regulate and settle transactions. The RBA

united some card system company like Visa and MasterCard, to economize timing of citizens.

For example, Australian citizens have 9 ways to pay the phone bill (Wang, 2003). In addition,

the RBA provides facilities for final settlement of payment system obligation.

As the government‟s banker, the RBA is responsible for issuing banknote. In some ways,

central bank issues banknote to control the economy. If the RBA decreases the reserve

requirement ratio, it will induce the increasing in money supply in the market. Inflation may

happen.

II. Functions of the Australian Prudential Regulatory Authority (APRA)

Established on 1 July 1998, the Australian Prudential Regulation Authority has the rights to

supervise the financial institutions. The APRA aims to ensure that the financial institutions

are matching with a stable financial market.

Firstly, the APRA issues operating licenses to the entity. Deposit-taking institutions are

regulated by the APRA under a single licensing regime. Domestic and Foreign financial

institutions can apply to become a deposit-taking institutions if they meet the licensing

standards. Licensing for institutions can operate financial market effectively. It restrains

financial institutions to manage legally.

Secondly, the APRA enforces prudential supervision of deposit-taking institutions, insurance,

superannuation and friendly societies. The RBA, insurance and pensions committee and

state-related regulatory authority supervise the financial market separately before supervision of the APRA. The advent of the APRA alters the method from decentralization to

centralization. The benefit of centralization is that APRA integrates the standards of

supervision; the same standard provides coherence for the process of supervision. Based on

Banking Act 1959, Insurance Act 1973 and Australian Prudential Regulation Authority Act

1998, the APRA acts more cautious according to the Law and enhances the prudential

regulatory efficiency and quantity (the APRA, 2011).

In the meanwhile, financial institutions themselves regularize their daily transactions and

performances, keeping balance of financial safety and efficiency. The APRA strengthens the

public‟s confidence for financial institutions. They regulate the unfair treatment happened in

banks, insurances, superannuation and so on. To some extents, this supervision protects the

customer. For instance, the APRA required CBA, Westpac, NBA and ANZ draft a plan to