Financial regulators of australia and all about interest rates

Essay by vivHigh School, 11th gradeA+, February 2005

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Reserve Bank of Australia - overall financial system stability

Objectives of RBA: stability of Australia's economy (prevention of fall of a financial system that could cause a substantial reduction of economic activity), maintenance of full employment and economic prosperity/welfare of Australians

Realistic focus: sustain low inflation

Functions of RBA:

Stability of economic system - provides guidelines for APRA to foster the financial system's stability

Control of currency - controls the amount of currency printed, varying according to community demands

Regulation of payments system - ensures stability/efficiency in payment methods (electronic cash, travellers' cheques, stored value cards etc.) conducted by Payments Systems Board

Banker to banks - it holds banks' exchange settlement accounts (used to settle debts between banks). It is also a banker in the sense that it is used to buy/sell govt. securities to financial institutions, known as open market operations.

Holds reserve of foreign currency/gold - used to make international payments and in the FOREX market

Government banker and economic advisor for the government - govt.

lodges excess funds and obtains funds (through treasury bills) in RBA and raises short term and long term loans (pays interest on these). The RBA's assessments on the state of the economy influence the government's economic policy.

Conducting the Monetary Policy - the monetary policy: when the RBA influences interest rates resulting in economic growth and activity as well as low inflation.

Australian Prudential Regulation Authority - prudential supervision of banks and superannuation funds

Role of APRA: to regulate financial institutions (authorised deposit-taking institutions) e.g. banks, credit unions

Functions of APRA:

Ensuring institutions meet their obligations

A recovery role for those who don't/can't

Australian Securities and Investments Commission - market integrity and consumer protection of the financial system

Role and Functions of ASIC:

To protect consumers

Monitoring, investigating and prosecuting in relation...