A A bank is a financial institution that largely deals with deposits and loans for a variety of reasons such a commercial or personal.

The difference between a bank, an ADI, credit union, , and mutual bank ADI is an authorised deposit taking situation. An institution must be accredited to accept deposits from the public.

Credit Union A credit union is a member-owned financial cooperative, controlled by its members credit at competitive rates as well as other . Credit institutions are created, owned and operated by their participants. As such, they are not-for-profit enterprises that enjoy tax-exempt status.

Building Society a type of financial institution that provides banking and other financial services to its members. Building societies resemble credit unions. They are similar to credit unions and savings and loan institutions, but their members are typically those in construction trades, real estate, or co-op housing.

Mutual Bank A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund.

Finance and the Finance Industry Finance is a broad term that describes activities associated with banking, leverage or debt, credit, capital markets, money, and investments. Basically, finance represents money management and the process of acquiring needed funds. Finance also encompasses the oversight, creation, and study of money, banking, credit, investments, assets, and liabilities that make financial systems. The financial sector is a section of the economy made up of firms and institutions that provide financial services to commercial and retail customers. This sector comprises of a broad range of industries, including , investment companies, insurance companies, and real estate companies.

Prudential Prudential means to be careful and avoid risk. Prudential regulation is a type of financial regulation that requires financial firms to control risks and hold adequate capital as defined by capital requirements, liquidity requirements, by the imposition of concentration risk (or large exposures) limits, and by related reporting and public disclosure requirements.

Main legislative instruments regulate banks (Acts) Federal Government (parliament) and States Banking Regulation 2016 (Cth)

Government and non-government bodies regulate the Australian banking and finance industry The Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australian (RBA), treasurer, AFP.

Main banks in • (NAB) • • Australian and New Zealand Banking Group (ANZ) • Bank • Macquarie Bank • • Bendigo Bank

Minor “banks” in Australia • Police bank • Up banking • UBank • RSL Money • • Limited

Major financial companies (not banks) in Australia • AMP Community First (Credit Union) • Easy Street (Credit Union) • Insurance Australian Limited • Credit Unions • Investment Banks • Super Funds • Insurance Companies

Why you Should Care About Banking and Finance Law • Australia is the second wealthiest nation in the world in terms of wealth per adult (USD 403,000 per adult in 2013) and was the world’s top destination for millionaires (beating the US) in 2017. • As of June 2019, Australians have $2.9 trillion in superannuation assets, making us the 4th largest holder of pension assets in the world • Australians have $2 trillion in personal debt, which is 212% of net average income, ranking us 4th highest in the world. This means if the average person earns $80,000 net, they are spending $169,600 per year. 56% in mortgages and 37% in investment debt. • Australia's financial services sector is the largest contributor to the national economy, contributing around $140 billion to GDP a year. It is a major driver of economic growth and employs 450,000 people • Australia’s banks are amongst the 50 safest banks in the world and between them hold 80% of the home loan market in Australia. Their combined assets are $2.66 trillion, or 200% of GDP. • 37% of Australians have a mortgage, the average mortgage being $388,100. • The market for life insurance in Australia is valued at $44 billion per annum.

Context of Australian Banking • s 51 (xiii) Constitution of Australia confers on the Australian Commonwealth parliament the power to make laws relating to banking, • APRA – the Australian Prudential Regulation Authority. • ADI’S - the institutions which carry on the business of banking are termed ADI’s – Authorised Deposit-taking Institutions, s7 Banking Act 1959 (Cth): • WALLIS ENQUIRY RECOMMENDATIONS, 1997

Why Regulate Banking • Banking is dangerous and risky • The impact of bank failures on society • Use of banks for illegal purposes • Concentration of ownership of banks

Contra Argument: • Regulation interferes with a competitive market • Competition means a better deal for consumers

151 Wallis Enquiry Recommendations • The reserve bank to be responsible for Australia’s monetary policy • Independent regulation of the financial sector, not by reserve bank APRA was born • A body to establish rules for the way banking was conducted, and to enforce those rules ASIC was born • A board would be created to oversee the procedures for the payments system Payments System Board was born