RBA和APRA描述

1、FIN 1103 Financial Market S6 2011Student Name: Ma ShengcheStudent ID: 0061013934Due Date: 11 November 2011Words count: 1493 wordsI. Functions of the Reserve Bank of Australia (RBA)As Australias central bank, the Reserve Bank of Australia has the responsibility of providing services to the Government

2、 as well as other banks and institutions. It is one of three main financial regulators that aim to promote the financial systems stability, efficiency and reliably.The Reserve Bank Act 1959 described that the RBA has two boards. Function of Reserve Bank Board is to establish and implements monetary

3、policy to maintain a stable financial system and issues the nations currency. Function of Payment System Board is to regulate the payment system in order to control risk, promote efficiency and competition.The RBA has the function to promulgate proper monetary policy, with the objectives of stabiliz

4、ing the currency, employment rate and economic prosperity. Its monetary policy establishes through adjusting cash rate. Cash rate determines the interest rate among commercial banks. In addition, it will influence inflation rate, as well as the economic vitality (the RBA, 2011). A given example is i

5、n 1997, Australian Dollar fell rapidly. The RBA interfered in all aspects of financial market to restrain the falling. They sold reserved foreign currency and bought Australian Dollar. In the meanwhile, RBA stopped buying foreign currency for the Government of Australia with the purpose of counterac

6、ting the influences of interferences. The exchange rate of Australian Dollar finally went up. Changes in the cash rate will affect the savings and investment behavior of individuals and businesses. All of that will adjust the inflation rate to an expected one. For inflation rate changes, price of go

7、ods and GDP will follow to change. As far as the payment system, the RBA is responsible for controlling risk, promoting the efficiency and competition in the market for payment services, consistent with the overall stability of the financial system. The payment system is divided into wholesale and r

8、etail payment orders. The RBA has the function to regulate and settle transactions. The RBA united some card system company like Visa and MasterCard, to economize timing of citizens. For example, Australian citizens have 9 ways to pay the phone bill (Wang, 2003). In addition, the RBA provides facili

9、ties for final settlement of payment system obligation.As the governments banker, the RBA is responsible for issuing banknote. In some ways, central bank issues banknote to control the economy. If the RBA decreases the reserve requirement ratio, it will induce the increasing in money supply in the m

10、arket. Inflation may happen.II. Functions of the Australian Prudential Regulatory Authority (APRA)Established on 1 July 1998, the Australian Prudential Regulation Authority has the rights to supervise the financial institutions. The APRA aims to ensure that the financial institutions are matching wi

11、th a stable financial market. Firstly, the APRA issues operating licenses to the entity. Deposit-taking institutions are regulated by the APRA under a single licensing regime. Domestic and Foreign financial institutions can apply to become a deposit-taking institutions if they meet the licensing sta

12、ndards. Licensing for institutions can operate financial market effectively. It restrains financial institutions to manage legally.Secondly, the APRA enforces prudential supervision of deposit-taking institutions, insurance, superannuation and friendly societies. The RBA, insurance and pensions comm

13、ittee and state-related regulatory authority supervise the financial market separately before supervision of the APRA. The advent of the APRA alters the method from decentralization to centralization. The benefit of centralization is that APRA integrates the standards of supervision; the same standa

14、rd provides coherence for the process of supervision. Based on Banking Act 1959, Insurance Act 1973 and Australian Prudential Regulation Authority Act 1998, the APRA acts more cautious according to the Law and enhances the prudential regulatory efficiency and quantity (the APRA, 2011). In the meanwh

15、ile, financial institutions themselves regularize their daily transactions and performances, keeping balance of financial safety and efficiency. The APRA strengthens the publics confidence for financial institutions. They regulate the unfair treatment happened in banks, insurances, superannuation an

16、d so on. To some extents, this supervision protects the customer. For instance, the APRA required CBA, Westpac, NBA and ANZ draft a plan to assume that they trap into financial crisis and how they close up and dispose their assets in July 2011 (Zhen, 2011). They hope banks can react quickly when cri

17、sis happened so that bottom out of the benefits of depositors.Thirdly, the APRA take actions on risk management of regulators. If the regulators meet the financial problems, the APRA will take measures to protect depositors. The APRA mainly focuses on risk assessment to make sure that institutions h

18、ave an internal risk control system. If necessary, the APRA will be directly involved in the operation of institutions and require them to strengthen their risk management. Thus, the APRA has developed a risk rating system called PAIRS and SOARS. The APRA requires regulatory agencies to report probl

19、ems in actual situations. The APRA supervises on risk management more than regulatory compliance. III. Overlapping functions of RBA and APRAThere are four agencies that have the responsibility to regulate and supervise the financial market. They are APRA, ASIC, RBA and the Australian Treasury. The R

20、BA and the APRA work closely to ensure the stability of Australian financial market. They cooperate on information sharing, react relatively on financial risk, negotiate about prudential regulation and participate in international financial supervision affairs (Li, 2003). The overlapping function of

21、 RBA and APRA is supervision. In 1983, Australian Dollar was adopted method of floating rate. To our surprise, the banks were out of control of the RBA. The Australian financial market turned out to be completely deregulated. Meanwhile, the RBA established a specialized banking supervision function.

22、 After the Wallis Committee was announced, the banking supervision function was transferred from the RBA to the APRA.The supervision from RBA is mainly macro. It means the RBA focuses on the supervision of financial market. Macro supervision is related to the monetary policy. In order to stabilize t

23、he financial market, the RBAs supervision focuses on how to lessen systematic risk (Yang, 2010). The aim of it is to maintain the low inflation rate. Every month except January, the RBA will hold a meeting to discuss whether the interest rate needs to be raised or cut according to CPI. The RBA is th

24、e central bank of Australia, so supervision is a part of his function. His main responsibility is to implement proper monetary policy. The regulation of APRA based on inherent risk of financial institutions. The APRA has the right to execute a company which violates the regulatory standards. They co

25、me up with PAIRS to estimate the companys overall risk of failure. The procedure of regulation is to evaluate the inherent risk of a company first. Then, they need to analysis their management and control system. According to problems, they adjust the companys capital support (Dan, 2009). IV. Conclu

26、sions: the most important functionIn brief, the most influential function of the RBA is his monetary policy. The RBA control the financial market through monetary policy and the borrowers and lenders are influenced by it. Their primary target is to keep the inflation rate stands between 2% to 3%. Th

27、e Reserve Bank of Australia raised the interest rate 7 times from November 2008 to October 2009. Since November 2010, the interest rate leveled off at 4.75%. On 1st November 2011, the RBA decreased the interest rate. It reflected that the RBA was worried about the Americas economy and sovereign debt

28、 crisis in euro zone. All of these actions are to maintain the stability of Australian Dollar. Another purpose is that the RBA try to ensure the citizens have been employed as much as possible. The RBA implements the proper monetary policy to maintain the economic growth rate. In the meanwhile, the

29、RBA has to guarantee the welfare of individuals. They are supposed to make sure that the old have enough subsidies. All in all, the RBA regard that controlling the inflation rate and maintaining the stability of Australian Dollar are the foundation objectives for the long-term prosperous economy.The

30、 prosperous economy can not leave without the regulation of APRA as well. The most influential function of the APRA is prudential supervision of deposit-taking institutions, insurance, superannuation and friendly societies. Without supervision of the APRA, the financial market will be turbulent. Som

31、e financial institutions will break the rule and do not get punished. The enormous contribution of the APRA can be seen in HIH example. HIH is an insurance company in Australia. The APRA found out that the HIH had 220 million Australian Dollar reinsurance compensation fees in the contract. However,

32、HIH paid 100 million and counterfeited 120 million Australian Dollar as his benefit. The APRA pointed out that it had problems in his reinsurance operation. At last, HIH went bankrupt. The APRA evaluates the overall risk of failure and warns the dangerous company. The APRA should make sure that the

33、financial market is fair and reduces the systematic risk as possible as they can.To conclude, the development of Australias financial market can not leave without the contribution of the RBA and the APRA. They operate their own unique functions independently. In addition, they cooperate together mos

34、tly to ensure that the Australian financial market is fair and stable.References1. About the RBA (n.d.). viewed 8th November 2011 2. APRAs policies on information (n.d.). viewed 10th November 2011 .au/AboutAPRA/Pages/Information-Policies.aspx3. Dan K. 2009, “The Worlds Safest Banks

35、 2009”，Global Finance, October 20094. Li, B.N. 2003, brief introduction of Australian financial market, Henan financial management college paper, February, pp. 18-195. Wang, G.H. 2003, the payment system of Australia, viewed 9th November 2011 6. Yang, S.Y. 2010, Macro prudential regulation: the new function of central bank, viewed 8th November 2011 7. Zhen, X.Y. 2011, The APRA requirements, viewed 10th November 2011 Task 2Problem SolvingNovember 201