Lecture 2 Flashcards
What are Australia’s Regulatory Bodies?
RBA, ASIC, ACCC, APRA and AUSTRAC
What are the 3 components/ bodies of the regulatory framework?
– Reserve Bank of Australia (RBA)
– Australian Prudential Regulation Authority (APRA)
– Australian Securities and Investments Commission (ASIC)
What does AUSTRAC abbreviation off?
Australian Transaction Reports and Analysis Centre
ACCC full name?
Australian Competition and Consumer Commission
What is the CFR?
Council of Financial Regulators
What is the function of CFR?
no regulatory function; rather acts as a mechanism for coordination and cooperation => advising the Federal Government on the adequacy of Australia’s financial system architecture in light of ongoing developments.
What representation is in the CFR?
federal treasury to provide an avenue for the
government to have representation and input into the regulation of the financial system
CFR purpose?
avoid overlaps and gaps in regulatory coverage that sometimes
occur when more than one party deals with similar issues (ie financial crisis)
CFR key role?
to ensure that the activities of the 3 agencies are appropriately
coordinated in the framework of contributing towards the efficiency and
effectiveness of regulation and the stability of the financial system.
CFR key role?
to ensure that the activities of the 3 agencies are appropriately
coordinated in the framework of contributing towards the efficiency and
effectiveness of regulation and the stability of the financial system.
What are the 5 legislations that govern financial intermediation in Australia?
– Reserve Bank Act 1959
– Banking Act 1959
– Financial Transaction Reports Act 1998*
– Financial Services Reform Act 2001 – CLERP 6
– Financial Sector (Collection of Data) Act 2001
– Financial Services Reform Act 2001 – CLERP 6
– Financial Sector (Collection of Data) Act 2001; when these two merge what did they form and why?
two laws morph into the anti money laundering and terrorism act of 2006. Following 9/11
Anti-Money Laundering and Counter-Terrorism Financing Act 2006
History of the RBA 1911 important?
1911 - The establishment of the Commonwealth Bank of Australia (CBA) as a trading and savings bank – this evolved into a central bank
History of the RBA;1959?
The separation of the CBA’s commercial operations and central banking duties. This separation led to the formal establishment of the RBA.
• CBA for commercial and savings bank activities
• RBA as central bank and bank supervision
History of the RBA; adjustments 1998?
The responsibilities of the RBA were adjusted in light of the
reports of the Campbell Committee (1981) and the Wallis Committee
(1997).
• RBA – Monetary policy, system stability, payment system & others
• APRA – Financial supervision
What operations did Commonwealth Bank of Australia take over from the government and Federal Treasury as part of its Central Bank role?
- 1920: took over note issuance from federal treasury
- 1924: all commercial banking settlements
- 1929: control over gold reserve
- 1931: control over exchange rate
- 1940s: control over operations of bank system, including power to set interest rates, and to require private banks to deposit funds with it as part of the minimum liquidity and capital requirements.
What does the RBA do?
- The determination and implementation of monetary policy (main responsibility);
- Maintain financial system stability
- Overseeing the payments system
- Market Operations
- Production and issue, reissue and cancellation of Australia’s notes
What is Monetary Policy?
actions taken by the RBA to affect monetary and financial conditions in the money market (also known as the cash market) to help achieve economic objectives of low inflation and sustainable growth.
What are the objectives of monetary policy
- Maintenance of a stable currency of Australia
- Maintenance of full employment in Australia
- Maintenance of the economic prosperity and welfare of the people of Australia.
What is the RBA’s monetary policy’s principal medium-term objective?
control inflation.
- involve setting the interest rate on overnight loans in the money market and therefore influence longer term interest rates.
- Through these channels, monetary policy affects the economy in pursuit of the goals outlined above
What is the payments system?
arrangements which allow
consumers, businesses and other organizations to transfer funds to one another.
Who oversees the payment system?
RBA: The Payments System Board
Why does the RBA oversee the payments system?
To enhance the safety and efficiency of the payments system
How does the payments system work?
settlement of obligations between payments providers is by entries to their Exchange Settlement (ESA) accounts at the Reserve Bank.
How are large-value payments settled?
one-by-one on a real time
gross settlement, RITS
How are retail payments settled?
retail payments are settled as a batch on a deferred net settlement basis.
What tasks does a banks day to day; Domestic Markets Department (open market
operations) have?
task of maintaining conditions in the money market so
as to keep the cash rate at or near an operating target decided by the
Board.
How does the RBA intervene in the Foreign Exchange market?
When the RBA intervenes, it buys or sells Australian dollars
against another currency, almost always the US dollar.
Production and issue, reissue and cancellation of Australia’s notes; Objective?
Achieving a clean, counterfeit-free circulation
Production and issue, reissue and cancellation of Australia’s notes; Objective?
Achieving a clean, counterfeit-free circulation
ASIC, stands for?
Australian Securities and Investments Commission.
What is ASIC overview of responsibilities?
consumer protection in superannuation, insurance, deposit taking and, from 2002, credit. -Consumer credit regulator -markets regulator -financial services regulator
Who does ASIC report to?
The Commonwealth parliment, the Treasurer and the Parliamentary Secretary to the Treasurer.
ASIC oversees 6 directorates what are they?
- Enforcement-can legally prosecute.
- Consumer Protection.
- Compliance
- Regulation
- Operations
- Finance
What act does ASIC enforce?
Corporation Act and the Australian Securities and Investments Commission Act 2001
What are the objectives of RBA?
-make information about companies and other bodies available to the public
– promote confident and informed participation by investors and
consumers in the financial system
– improve the performance of the financial system and the entities within it.
– uphold the law uniformly, effectively and quickly
Examples of ASIC activities?
– register companies and managed investment schemes
– register auditors and liquidators
Examples of ASIC activities?
– register companies and managed investment schemes
– register auditors and liquidators
ACCC promotes, roles and activities?
primary responsibility is to ensure that individuals and
businesses comply with the Commonwealth competition,
fair trading and consumer protection laws.
• promotes competition and fair trade in the market place to
benefit consumers, business and the community.
• regulates national infrastructure services.
Difference between ASIC and ACCC?
ASIC generally deals with the provision of information and compliance with financial regulations.
ACCC ACCC deals with general goods markets, most of its powers are listed under the trade practices act. Reviews mergers and acquisition for too much market power.
ACCC administer what act?
Competition and Consumer Act (2010), (formerly known as Trade Practices Act* )
What was the purpose of the Competition and Consumer act?
To enhance welfare through the promotion of competition and fair trading and provision for consumer protection.
APRA stands for?
Australian Prudential Regulatory Authority
What does APRA do?
It supervises ADIs, financial institution, superannuation and insurance.
What is prudential supervision?
Controlling the risks taking by financial institution ensuring they do not collapse.
APRA aims to increase the safety of what?
The safety of the depositors funds, insurance policy holders, superannuation fund members and the stability of the financial system.
Objective “To establish and….”
enforce prudential standards and practices designed to ensure that under all reasonable circumstances, financial promises made by financial institutes we supervise are met within a stable, efficient and competitive financial market.
What is FCS?
Financial Claims Scheme it is the Australian govt. guarantee on deposits.
The Coverage Scheme for ADIs.
The FCS applies to deposits held with ADIs incorporated in Australia. This
includes:
– Australian banks, building societies and credit unions; and
– foreign subsidiary banks.
What is the permanent guarantee cap given by the Financial Claim Scheme?
$250,000 has been in place
and the cap applies per account-holder, per ADI
AUSTRAC stands for?
Australian Transaction Report and Analysis Centre
What act was AUSTRAC required to comply with by FAFT?
Anti-Money Laundering and Counter-Terrorism Financing
Act 2006 (AML/CTF Act) was enacted in late 2006 and
AUSTRAC’s current responsibilities were determined.
what dual roles did AML/CTF act require AUSTRAC to take on?
-AML/CTF regulator
-Financial Intelligence
Unit (FIU).
What is AUSTRACs regulatory role?
Oversees the compliance of Australian businesses, defined
as ‘reporting entities’, with their requirements under the Anti-
Money Laundering and Counter-Terrorism Financing Act
2006 (AML/CTF Act) and the Financial Transaction Reports
Act 1988 (FTR Act).
What is AUSTRACs regulatory role?
Provides financial information to State, Territory and
Australian law enforcement, security, social justice and
revenue agencies, as well as certain international
counterparts
reforms under AML/CTF regulatory regime are a major step towards:
• enabling Australia’s financial sector to maintain international
business relationships
• preventing and detecting money laundering and terrorism financing
by meeting the needs of law enforcement agencies for targeted
information about possible criminal activity
• bringing Australia into line with international standards, including
standards set by the Financial Action Task Force (FATF).
reforms under AML/CTF regulatory regime are a major step towards:
• enabling Australia’s financial sector to maintain international
business relationships
• preventing and detecting money laundering and terrorism financing
by meeting the needs of law enforcement agencies for targeted
information about possible criminal activity
• bringing Australia into line with international standards, including
standards set by the Financial Action Task Force (FATF).
Who needs to submit an AML/CTF compliance report?
Reporting entities’ are required to give AML/CTF compliance reports to the
AUSTRAC Chief Executive Officer (CEO).
What reports do reporting entities provided to AUSTRAC?
- Reports of suspect transactions =any size
2.Reports of threshold transactions >10 000
3.Reports of International Funds Transfer Instructions
4.Reports about movements of physical currency into or out of
Australia≥ $10,000
What does CREST stand for?
Compliance Risk Exposure Scoring Tool
What is CREST
a tool AUSTRAC has developed, a new risk assessment approach,assist the agency in its risk-based
supervision of regulated entities.
what is Money Laundering?
Post Sept 11 money laundering definition: “Moving funds
through financial transactions or accounts to disguise its origin
and/or purpose”.
3 steps of how money cn be laundered through FIs?
- Placement - refers to the initial point of entry for funds derived from
criminal activities - Layering - refers to the creation of complex networks of transactions
which attempt to obscure the link between the initial entry point, and
the end of the laundering cycle. - Integration - refers to the return of funds to the legitimate economy
for later extraction
What is an OFC?
Jurisdictions where financial institutions and businesses are set-up which do not
conduct or conduct very little domestic business.
