3. The Regulatory and Legal Environment Flashcards
What are the three key banking regulators in Australia?
- RBA (Reserve Bank of Australia)
- ASIC (Australian Securities and Investments Commission
- APRA (Australian Prudential Regulatory Authority)
What is the RBA broadly responsible for?
Responsible for monetary policy, overall stability of the financial system and regulation of the payments system.
What is ASIC broadly responsible for?
Responsible for market integrity and consumer protection across the financial system.
What is APRA broadly responsible for?
Responsible for prudential supervision of banks, building societies, life and general insurance, companies and superannuation funds.
What are the six roles of the RBA?
- Monetary policy
- Financial stability
- Financial market operations
- Payments and infrastructure
- Banking
- Banknotes
What are the three goals of the RBA regarding monetary policy?
- Stability of the currency of Australia
- Maintenance of full employment
- Economic prosperity and welfare of the people of Australia
What is the CPI target of the RBA?
Between 2-3%, on average, over time.
How does the RBA maintain financial stability?
The Reserve Bank will use its power and influence to foster the stability of the Australian financial system. This entails the accurate assessment and successful management of domestic sources of systemic risk, as well as assisting the financial system to maintain its resilience to any shocks that might come from abroad.
What is meant by financial market operations.
The Reserve Bank operates in domestic and international financial markets in order to achieve its policy objectives. These operations include implementing monetary policy decisions of the Reserve Bank Board, facilitating the smooth functioning of the payments system, managing the nation’s foreign exchange reserve assets and providing banking services to clients (mainly the Australian Government and foreign central banks).
How does the RBA support monetary policy through financial market operations?
The Reserve Bank’s operations in financial markets support its monetary policy objectives through the specification of an operational target for the overnight cash rate.
How does the RBA manage foreign exchange reserves?
Regular transactions in the foreign exchange market help to manage Australia’s foreign currency reserves.
What are three of the distinct aspects of the Reserve Bank’s role?
- Monetary policymaker
- Overseer and supervisor for overall stability of banking system
- Owner and operator of the key national payments infrastructure
What are the three areas the RBA uses its policymaking to influence regarding payments and infrastructure?
- Controlling risk in the financial system
- Promoting the efficiency of the payments system
- Promoting competition in the market for payment services
What are the roles of the RBA with respect to other banks?
The Reserve Bank acts as banker for the Commonwealth and also provides banking services to a number of overseas central banks and official institutions. Banks hold an Exchange Settlement Account with the Reserve Bank to settle financial obligations arising from the clearing of payments.
How is the RBA involved in managing banknotes?
The Reserve Bank works with Note Printing Australia to design banknotes and arrange for their production. Banknotes are distributed to financial institutions by the Reserve Bank, which also monitors and maintains their quality and then withdraws unfit banknotes from circulation. It also monitors and analyses counterfeiting and researches banknote security.
What are five areas in which regulations influence banks?
- Customers - Maintaining customer accounts, providing an efficient customer service, managing customer information and maintaining confidentiality
- Policies and procedures - Governing and managing business operations. This includes dealing with customer complaints.
- Risk and reporting - Disclosing and reporting financial information, managing risk and marketing products and services
- Payments - Providing payment services such as BPAY and international transfers
- Lending - Lending to borrowers and sourcing funds from depositors
What are the two boards outlined by the Reserve Bank Act 1959?
- Reserve Bank Board
- Payments System Board
What are the three aims of the Reserve Bank Board?
Ensures that monetary and banking policy contributes to:
- Stability of the Australian currency
- Maintenance of full employment in Australia
- Economic prosperity and welfare of the Australian people
What are the three aims of the Payments System Board?
Ensures that the payments system contributes to:
- Controlling risk in the financial system
- Promoting the efficiency of the payments system
- Promoting competition in the market for payment services, consistent with the overall stability of the financial system
What are payments systems?
Arrangements which allow consumers, businesses, and other organisations to transfer funds (usually held in an account at a financial institution) to one another.
What are the three types of payments systems?
- Consumer payment methods
- High value clearing system
- Clearing and settlement systems
What are some examples of consumer payment methods?
- Cash payments
- Non-cash payments (e.g., EFTPOS)
- Electronic credit transfers and direct debits
- Payment cards (e.g., credit and debit cards)
- ATMs
-Third party bill payments (e.g., BPAY)
Internet payment system (e.g., PayPal)
What does HVCS stand for?
High value clearing system
What are high value clearing systems?
HVCS manages the exchange of high value payments.