Financial Institutions and Markets
Financial Institutions and Markets
2.1 Outline the roles of the various monetary authorities that regulate the Australian financial system. What is the role of Council of Financial Regulators?
In Australia, the role of monetary authorities is split between three independent statutory agencies with specific responsibilities in the Australian financial sector:
1. The Reserve Bank of Australia (RBA), Australia’s central bank, is responsible for monetary policy, systemic stability and the payments system;
2. The Australian Prudential Regulation Authority (APRA) is responsible for prudential supervision of financial institutions including banks, credit unions, building societies, and insurance and superannuation companies.
3. The Australian Securities and Investments Commission (ASIC) is responsible for enforcement of company and financial services laws, with the aim of protecting consumers, investors and creditors. This includes the responsibility of licensing and monitoring financial markets and advisors, and monitoring the disclosure and conduct of Australian companies and financial services providers.
The three agencies are coordinated by the Council for Financial Regulators (CFR) which acts as a mechanism for information sharing in relation to views and discussion on regulatory issues between the three agencies.
2.2 Explain the sense in which the RBA is independent of the Federal Government. How independent is the RBA in reality? What is your opinion about the importance of the RBA’s independence for the Australian economy?
The term ‘RBA independence’ means that the RBA is free from political and bureaucratic pressures when it formulates and executes monetary policy. The RBA is not directly under the authority of the Government or the Prime Minster. Whether independence is important is a debated issue. Advocates of independent central banks believe that independence from day-to-day political pressure allows central banks to better manage
2.1 Outline the roles of the various monetary authorities that regulate the Australian financial system. What is the role of Council of Financial Regulators?
In Australia, the role of monetary authorities is split between three independent statutory agencies with specific responsibilities in the Australian financial sector:
1. The Reserve Bank of Australia (RBA), Australia’s central bank, is responsible for monetary policy, systemic stability and the payments system;
2. The Australian Prudential Regulation Authority (APRA) is responsible for prudential supervision of financial institutions including banks, credit unions, building societies, and insurance and superannuation companies.
3. The Australian Securities and Investments Commission (ASIC) is responsible for enforcement of company and financial services laws, with the aim of protecting consumers, investors and creditors. This includes the responsibility of licensing and monitoring financial markets and advisors, and monitoring the disclosure and conduct of Australian companies and financial services providers.
The three agencies are coordinated by the Council for Financial Regulators (CFR) which acts as a mechanism for information sharing in relation to views and discussion on regulatory issues between the three agencies.
2.2 Explain the sense in which the RBA is independent of the Federal Government. How independent is the RBA in reality? What is your opinion about the importance of the RBA’s independence for the Australian economy?
The term ‘RBA independence’ means that the RBA is free from political and bureaucratic pressures when it formulates and executes monetary policy. The RBA is not directly under the authority of the Government or the Prime Minster. Whether independence is important is a debated issue. Advocates of independent central banks believe that independence from day-to-day political pressure allows central banks to better manage