Regulation of Financial Markets

Question 1

What are the four government bodies that regulate the Australian financial system?

Answer 1

RBA, Australian Prudential Regulation Authority, ASIC, Treasury

Question 2

What is the CFR?

Answer 2

The council of financial regulators. An informal coordinating body of the four financial regulators, providing cooperation and collaboration of advice.

Question 3

Why must financial markets be regulated?

Answer 3

To ensure the security of the savings of investors and maintain flows of funds within the economy to maintain confidence and economic growth.

Question 4

What is the RBA?

Answer 4

Australia’s central bank, executing its monetary policy and overseeing stability of financial system in accordance with economic objectives.

Question 5

What are the three goals of the RBA?

Answer 5

Stability of Aus currency (inflation), maintain full employment, economic prosperity

Question 6

What are the roles of the RBA?

Answer 6

Conduct monetary policy, financial stability, note issuing, regulate payment system, banker to banks, hold gold reserves, advise gov.

Question 7

Describe the RBA’s role of conducting monetary policy.

Answer 7

The RBA manipulates the cost and availability of money in the economy via the interest rates. Aims to achieve low inflation (2-3%) and economic growth.

Question 8

Describe the RBA’s role of stabilising the financial system.

Answer 8

It monitors risks and developments in the financial system, advises APRA, helps them enforce regulations. Helps to avoid financial crises. They force banks to hold a minimum amount of liquid funds.

Question 9

Describe the RBA’s role of note issuing.

Answer 9

The RBA alters the production of currency, varying according to demand for currency. Sole note issuing authority.

Question 10

Describe the RBA’s role of regulating the payment system.

Answer 10

It ensures the efficiency of payment methods, promotes stability in the clearing and settling of large transactions in financial markets.

Question 11

Describe the RBA”s role of being banker to the banks.

Answer 11

Banks hold ES account with RBA. These are used to settle transactions between banks and with RBA. RBA uses this for interest rates and ensuring the stability of bank transactions.

Question 12

Describe the RBA’s role of holding gold reserves and foreign currency dealings.

Answer 12

The RBA provides the funds used to make international payments, or for operations in the forex market.

Question 13

Describe the RBA’s role of providing advice to the government.

Answer 13

Provides financial and economic advice. Can also complete transactions on behalf of gov. (such as welfare payments)

Question 14

What is the APRA?

Answer 14

The Australian Prudential Regulation Authority is the gov body established to regulate all deposit taking institutions including banks and super funds.

Question 15

What are the two main role of the APRA?

Answer 15

Ensuring that institutions can meet their obligations by making them hold a certain amount of funds.

Provide a recovery role in the case of financial difficulties experienced by these institutions.

Question 16

What is ASIC?

Answer 16

The Australian Securities and Investments Commission is the gov body responsible for corporate regulation, consumer protection and the oversight of financial products.

Question 17

Describe the role of ASIC.

Answer 17

Lift standards of corporate behaviour - intervene in illegal acts, protect consumers against deceptive conduct, regulate consumer credit, supervise the share market.

Question 18

What is the Australian Treasury?

Answer 18

The main source of economic advice to the gov. Can influence the budget, taxes, allocating expenditure, labour market policy.

Question 19

Describe the role of the Treasury in regulating financial markets.

Answer 19

Provides advice to gov on regulations of financial markets, corporate practises and consumer protection.