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CQIB - Chapter 3 - The Regulatory and Legal Framework > Unit 1 - Australian Regulatory Framework > Flashcards

Unit 1 - Australian Regulatory Framework Flashcards

- Recall the Australian Financial services regulators. - Discuss the responsibilities of the Reserve Bank of Australia (RBA). - Examine the RBA's role in promoting financial stability. - Identify the key components of the Australian payments system.

1
Q

When did the RBA become the Australian central bank and banknote issuing authority?

A

1960

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2
Q

When was a national licensing regime for providers of consumer credit and credit-related brokering/advice established?

A

2010

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3
Q

When was the Better Banking program launched?

A

2017

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4
Q

When was the New Payments Platform launched?

A

2018

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5
Q

Legally speaking, what is an Act?

A

Legislation (or law) passed by the Parliament. It sets out the broad legal and policy principles of the area being legislated.

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6
Q

What sets out the guidelines to indicate how the provisions of an Act are applied?

A

Regulations, rules, or codes.

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7
Q

Who sets out the framework for regulation?

A

The Australian Government through the Treasury and the Council of Financial Regulators.

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8
Q

What are the 5 elements of Australia’s regulatory framework?

A
  1. Government legislation and regulation.
  2. International regulatory initiatives and agreements.
  3. Industry codes of practice, standards and conventions.
  4. Contract and common law.
  5. Corporate governance and compliance policies and structures.
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9
Q

The financial services industry has five main regulators - who are they?

A
  1. RBA
  2. ASIC
  3. APRA
  4. ACCC
  5. AUSTRAC
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10
Q

RBA - who are they and what are three of their key responsibilities?

A

Reserve Bank of Australia. Responsible for
1. Monetary policy
2. Financial system stability
3. Payment system regulation

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11
Q

APRA - who are they and what are 3 things they supervise?

A

Australian Prudential Regulation Authority. Responsible for the prudential supervision
1. ADIs
2. Insurance (general and life)
3. Super funds

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12
Q

ASIC - who are they and what are 2 things do they are responsible for?

A

Australian Securities and Investments Commission. Responsible for
1. Market integrity
2. Consumer protection

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13
Q

ACCC - who are they and what do they do?

A

Australian Competition and Consumer Commission (independent authority of Australian government).

Responsible for:
1. Promoting competition and fair trading
2. Regulating national infrastructure.

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14
Q

AUSTRAC - who are they and what are two things they’re responsible for?

A

Australian Transaction Reports and Analysis Centre.

Responsible for:
1. Administering the Anti-money Laundering and Counter Terrorism Financing Act
2. Acting as Australia’s financial intelligence agency.

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15
Q

Which 3 regulators sit under the Treasury’s Council of Financial Regulators?

A
  1. RBA
  2. ASIC
  3. APRA
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16
Q

There are also additional regulators who play a support role in the governance of the financial services industry. Name 3?

A
  1. ATO
  2. Foreign Investment Review Board (FIRB)
  3. Office of the Australian Information Commissioner (OAIC).
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17
Q

What is the Australian Taxation Office (ATO)?

A

The government’s principal revenue collection agency

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18
Q

What does the Foreign Investment Review Board (FIRB) do?

A

Examines proposals from foreign interests to undertake direct investment in Australia and makes recommendations to the government on whether such proposals are suitable for
approval under the government’s policy.

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19
Q

What does the Office of the Australian Information Commissioner (OAIC) do?

A

Administers the Privacy Act 1988 (Cth) and related legislation that ensures protection of personal information (including credit information).

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20
Q

True or false - the regulatory structure is designed to create transparency between banks and the people and companies with whom they do business?

A

True

21
Q

Where are some key areas that regulation affects for banks?

A
  1. Customers (interactions, accounts, information).
  2. Policies and procedures.
  3. Risk and reporting.
  4. Payments
  5. Lending
22
Q

What is the main responsibilities of the RBA?

A
  1. Overall stability of the financial system
  2. Monetary policy
  3. National payments infrastructure
23
Q

The RBA aims to contribute to the stability of the currency, maintain full employment and promote the economic prosperity and welfare of the Australian people. What are 5 ways it does this?

A
  • Setting the cash rate to meet an agreed medium term inflation target.
  • Working to maintain a strong financial system and efficient payments system.
  • Issuing the nation’s banknotes.
  • Providing banking services to the Australian Government and its agencies, and to a
    number of overseas central banks and official institutions.
  • Managing Australia’s gold and foreign exchange reserves.
24
Q

Under the Reserve Bank Act 1959, there are two boards - what are they?

A
  1. Reserve Bank Board
  2. Payments System Board
25
Q

What does the Reserve Bank Board do?

A

Ensures that monetary and banking policy contribute to:
* The stability of the Australian currency.
* The maintenance of full employment in Australia.
* The economic prosperity and welfare of the people of Australia.

26
Q

Under the Reserve Bank’s monetary policy, what is the commitment for inflation?

A

Keeping consumer inflation between 2 and 3 per cent, on average, over time.

27
Q

What does the Payments System board do?

A

Ensures 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

28
Q

What are some rays the RBA uses its power and influence to promote financial stability in the Australian financial system?

A

Legislation imposing
reserve requirements on banks, mandating they hold a certain percentage of liabilities, as a minimum, as cash reserves.

29
Q

What is a lender of last resort?

A

A lender of last resort offers loans to banks or other eligible institutions
that are experiencing financial difficulty or are considered highly risky
or near collapse, and whose failure to obtain credit would dramatically
affect the financial system. The lender of last resort functions to
protect individuals who have deposited funds and to prevent customers
panicking and withdrawing funds from banks experiencing temporary
limited liquidity. As banks only keep a percentage of total deposits as
cash, a bank’s liquidity can be quickly drained by panic withdrawing of
funds by its customers and cause the bank to become insolvent.

30
Q

What is a payments system?

A

Arrangements which allow consumers, businesses and other organisations to transfer funds (usually held in an account at a financial institution) to one another.

31
Q

What are common elements of payment systems?

A
  • Cash payments
  • Non-cash payments, e.g., EFTPOS
  • Cheques and other paper-based instruments
  • Electronic credit transfers and direct debits
  • Payment cards, e.g., debit and debit cards
  • ATMs
  • Third party bill payments, e.g., BPAY
  • Internet payment systems, e.g., PayPal
32
Q

What does the Fast Settlement Service (FSS) do and why?

A

Enables every single payment made on the platform, regardless of
its size, to be settled in real time in central bank funds, across each financial institution’s
Exchange Settlement Account (ESA). This allows for completion of settlement between financial institutions prior to crediting of the payee’s bank account.

33
Q

Why was the New Payments Platform launched?

A

There was a review of the Australian payment systems by the Payments System Board in 2012 that identified a range of additional features that were desirable in the Australian payments system.

34
Q

After the Payments System Board performed a review identifying features Australians wanted in their payments system, what was the main thing identified as desirable?

A

The capability to make payments in real time to consumers, businesses, and government.

35
Q

What does the High Value Clearing System (HVCS) do?

A

Manage exchanging of high value payments.

36
Q

What is the objective of the High Value Clearing System (HVCS)?

A

Provide a best practice, efficient, and highly secure electronic payments system for the Australian finance industry

37
Q

What mechanism does the High Value Clearing System (HVCS) use?

A

The e SWIFT Payment Delivery System (PDS)

38
Q

When people use the SWIFT Payment Delivery System (PDS) on the High Value Clearing System (HVCS), how is each payment settled?

A

Individually using the Reserve Bank Information and Transfer System (RITS)

39
Q

How does Real-time Gross Settlement (RTGS) work?

A

The funds of large value payments are transferred from one bank to another in ‘real time’ and on a gross basis.

40
Q

What are four different ‘clearing and settlement’ systems?

A
  1. ASX Clear
  2. ASX Clear (Futures)
  3. Austraclear
  4. CHESS (Clearing House Electronic Sub-register System)
41
Q

Explain ASX Clear

A

Provides central counterparty services for a range of financial products
traded on the ASX, including equities, warrants and equity-related derivatives.

ASX Clear is a wholly-owned subsidiary of the ASX group

42
Q

Explain ASX Clear (Futures)

A

Provides central counterparty services for the ASX 24 market.

43
Q

Explain Austraclear

A

Provides s settlement services for the OTC debt market and for derivatives traded on the ASX and ASX 24 markets. Austraclear is a wholly-owned
subsidiary of the ASX group.

44
Q

Explain CHESS

A

A settlement system for Australian equities operated by ASX Settlement

45
Q

What does CHESS stand for

A

Clearing House Electronic Sub-register System

46
Q

What type of payments are now the clear majority of consumer payments?

A

Card

47
Q

True or false - cash is being used less frequently

A

True

48
Q

What does AUSTRAC stand for?

A

Australian Transaction Reports and Analysis Centre

CQIB - Chapter 3 - The Regulatory and Legal Framework (6 decks)

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