Australian Financial Institutions and Markets Essay

Australian financial Institutions and Markets - Essay ExampleWhile banks are the major asset withholding financial institutions in Australia on that point are other major players in this arena. The increase the economic power of the banks and deregulation of the 1980s has increased the commercialise share over other financial institutions such as NBFIs(non-bank financial institution), super stocks, and other managed fund accounts (Lewis and Wallace 1997, 76). According to Wallace (1997,77) there are 3 major reasons for these changes. Large banks have an advantage in competition, Australian banks have significant advantages in the form of customer loyalty and extensive branch networks, with the record earnings in the sedulousness the banks have access to increasing amounts of capital and finally many of the newer banks in the industry had no clear strategy when they entered the trade, giving the big 4 an advantage. Now that banks have come into the market they are competing on several different levels with other financial institutions, indemnity companies and superannuation silver postulate directly in the market for managed pecuniary resource, and their products compete directly with instruments provided by the specie management arms of banks (Wallace and Lewis, 1197, 233). except as noted by Wallace and Lewis (1197, 233) life insurance and superannuation funds still comprise 80% of the managed funds sector. 2.1 restitutionIn 2002 the insurance industry in Australia held $173.9 billion in assets (Vinley 2003, 36). Insurance companies hold this large amount of assets because they have policy holders paying in monthly sums that may never be paid out or are paid out in smaller sums than were paid in. Insurance companies then use these assets to make m acey in financial markets through managed funds. Australian banks have seek to enter the insurance market and compete with the existing firms. According to the Wall Street Journal(2005,1), Commonwealt h Bank, one of the big 4 banks in Australia recently reported a 50% gain in root half profit which was a gist of their wealth management business and a steady result from their insurance arm. The ability of banks to expand into other financial services has affected the insurance industry as the Big 4 banks in Australia immediately compete with them. The insurance industry has now also begun to escape into the domain of other financial services in order to maintain their asset base. Vinley (2003, 36) points out that insurance companies have seen a decline in assets, but this has been offset by significant increases in their managed funds operations, particularly superannuation. The percentage share of superannuation assets has increased to 14.5 % from 1990-2002.2.2 SuperannuationIn Australia, superannuation is paid into the funds by employer contributions under the Superannuation Guarantee Charge and by individuals as voluntary contributions (Frino 2005, 2). Superannuation funds make their money by charging small fees for asset management as well as making returns by investing the large amount of assets they have. As stated before insurance companies are now creeping into the superannuation market, but so are Australian banks. They have become one hold back shopping for customers in the