Submission to the Financial System Inquiry List of tables

Chapters

Table 1: Types of Financial Institution

Table 2: Conglomerates

Table 3: Changes in Numbers of Credit Institution Groups

Table 4: The Two Basic Types of Products

Table 5: The Current Regulatory Structure

Table 6: Assets of Bank Subsidiaries

Table 7: Consumer Protection Measures

Appendix

Table A1: Assets of Credit Institutions

Table A2: Balance Sheet of the Banking Sector

Table A3: Debt-Equity Ratios of Non-Financial Enterprises

Table A4: Assets of Funds Managers(a)

Table A5: Average Daily Turnover in Financial Markets

Table A6: Earnings

Table A7: Superannuation Fund Earnings Rates

Table A8: Assets of Superannuation Funds

Table A9: Financial System Assets

Table A10: Range of Supervisory Functions in Countries with Broadly-based Supervisors

Table A11: Degree of Central Bank Involvement in Bank Supervision

Table 1: Types of Financial Institution
Per cent of financial system assets
June 1980 March 1996
Banks 41 46
Bank-owned merchant banks and finance companies 7 4
Other non-bank credit institutions 25 12
Banking group funds managers and insurers 4 8
Other funds managers and insurers 23 30
Table 2: Conglomerates
Per cent of financial system assets
1991 1995
Largest 4 conglomerates 38 36
Largest 10 conglomerates 56 53
Largest 25 conglomerates 68 68
Table 3: Changes in Numbers of Credit Institution Groups
1986 to 1996
Banks Merchant banks Finance companies Building societies Credit unions
Entrants +19 +62 +95 +4 )  
          ) −170*
Exits −11 −73 −132 −42 )  
Current number 52 78 96 25   285
* Estimated net change.
Table 4: The Two Basic Types of Products
Deposits
Insurance policies
Annuities
Investment products
Specified nominal amount must be repaid Investment managed on a ‘best endeavours’ basis. Value of units depends on market performance
Health of institution vital to value of product Health of managing institution has little or no effect on value of product
Underlying institution can fail, ie cannot meet commitments Underlying institution can have disappointing performance and a negative return
Institution bears most of the risk Investor bears most of the risk
Institution must hold substantial capital to meet commitments Institution holds little or no capital
Table 5: The Current Regulatory Structure
Type of regulation Reserve Bank of Australia Insurance and Superannuation Commission (and associated bodies) Australian Financial Institutions Commission (& State Supervisory Authorities) Australian Securities Commission (& self-regulatory bodies under Corporations Law) Other Commonwealth bodies Other State bodies/legislation (for some States & institutions these could be SSAs) Other self regulation
Members of Council of Financial Supervisors
Supervision/
oversight

Banks

Foreign exchange dealers

Life insurance companies

General insurance companies

Superannuation funds

Insurance agents and brokers

SSAs: building societies, credit unions

AFIC: special service providers

ASX: stock brokers

SFE: futures brokers

Collective investments

Securities and futures dealers/advisers

Private Health Insurance

Administrative Council: health insurers

Friendly societies

Trustee companies/public trustees

Miscellaneous State-based institutions

 
Consumer protection and selected other regulation  

Life and general insurance: disclosure

Superannuation: disclosure

Insurance agents and brokers: conduct

Superannuation Complaints Tribunal

 

Corporations: incorporation aspects

Securities and futures: disclosure and market conduct

ACCC:
  • competition
  • general trade practice issues
  • pricing
Consumer Credit Acts

Banking, building society and credit union: disclosure and EFT conduct

At least 6 industry-based complaints bodies (eg Bank Ombudsman)

Table 6: Assets of Bank Subsidiaries
Per cent of total – June 1996
Finance Companies Merchant Banks
Business lending 46 Business lending 36
Consumer finance 23 Liquid assets 33
Commercial leasing 25 Loans to related companies 21
Table 7: Consumer Protection Measures
Requirements Banks, Building Societies and Credit Unions General Insurance Life Insurance Superannuation Unit Trusts
Legislation Credit Code Insurance Contracts Act Life Insurance Legislation Superannuation Industry (Supervision) (SIS) Legislation Sections of Corporations Law
Codes & Disclosure Codes of Practice (voluntary, but contractually enforceable) Code of Practice (voluntary) and by Circular Code of Practice (compulsory), ISC Disclosure Circulars that provide for a Key Features Statement SIS legislation, Key Features Statement for retail products Sections of Corporation Law
Regulator State Consumer Affairs, APSC (monitors codes of practice) ISC ISC ISC ASC
Complaints Body ABIO, separate schemes for building societies and credit unions Enquiries and Complaints Scheme and Insurance Brokers Dispute Facility Life Insurance Complaints Services Superannuation Complaints Tribunal Financial Planning Association Complaints Resolution Scheme
Table A1: Assets of Credit Institutions
Per cent of total
1929 1936 1953 1970 1980 1985 1990 1995
Banks 94 95 88 70 58 59 69 77
Building societies 2 2 3 5 12 10 5 2
Credit unions 1 1 2 2 2
Money market corporations 3 6 11 11 9
Pastoral financiers 4 3 4 3 1 2 0 0
Finance companies 1 3 15 18 13 9 6
Other 1 3 4 3 4 3

Source: Martin Committee (1991) and Reserve Bank of Australia Bulletin

Table A2: Balance Sheet of the Banking Sector
$ million, June 1956
Trading banks Savings banks Total % of total assets
Liabilities
Non-interest bearing deposits 2,336   2,336 43.0
Savings bank deposits 2,289 2,289 42.1
Fixed deposits 514   514 9.5
Other (excludes capital) 142   142 2.6
Assets
SRDs 521 na 521 9.6
Government securities 415 1,704 2,119 39.0
Loans 1,945 364 2,309 42.5
Other 366 119 485 8.9

Source: Reserve Bank of Australia, Occasional Paper 8

Table A3: Debt-Equity Ratios of Non-Financial Enterprises
1981–1985 1986–1990 1991–1993
US 0.5 0.8 1.0
Japan 4.8 4.2 4.0
Germany 3.6 2.7 2.8
France 2.7 2.2 1.4
Italy 3.6 3.0 3.1
UK 1.1 1.1
Canada 0.9 0.9 1.0
Australia 0.5 0.6 0.6

Sources: OECD Non-financial Enterprises Financial Statements (for all countries except Germany and Australia); OECD Financial Statistics (for Germany); and Reserve Bank of Australia

Table A4: Assets of Funds Managers(a)
Control by ultimate manager(b) (%) As at June
1990 1991 1992 1993 1994 1995
Life office groups 45 45 44 42 39 39(c)
Banking groups 21 23 23 25 26 25
Other 34 32 33 33 35 36

(a) Excludes general insurers.
(b) Some estimation involved.
(c) Includes State Bank of NSW funds management operations.

Source: Reserve Bank of Australia

Table A5: Average Daily Turnover in Financial Markets
$ billion
Year
ended
June
Commonwealth
Treasury bonds
State Govt
bonds
Bank Bills Equities Promissory
notes
Foreign exchange
Physical Futures Physical Futures Physical Futures Swap Spot Forward
1980 0.1 0.03
1985 0.3 0.3 0.5 0.07 0.07 0.8 2.0 0.3
1990 1.2 1.7 2.0 1.7 11.4 0.23 0.19 0.5 7.5 8.6 1.4
1995 6.0 6.0 2.9 1.0 19.0 0.47 0.44 0.8 14.0 7.2 1.0

Source: Reserve Bank of Australia Bulletin and Occasional Paper No. 8

Table A6: Earnings
Per cent of shareholders' funds
1980–82 1990–92 1994 1995
Banks and finance 14.6 3.5 14.4 16.0
All companies 10.8 4.9 7.2 8.0

Source: Australian Stock Exchange Financial and Profitability Study

Table A7: Superannuation Fund Earnings Rates
Average earning rate Inflation rate
1960s 5.2 2.5
1970s 6.8 9.8
1980s 14.9 8.4
Early 1990s 6.8 3.0

Source: ABS Cat. Nos: 5204.0 and 6401.0. Earnings defined as the difference between change in assets and net contributions

Table A8: Assets of Superannuation Funds
December 1995
$ billion %
Cash and short-term bank instruments 40.4 14.5
Loans 20.7 7.4
Fixed interest 53.7 19.2
Equities 99.2 35.6
Property 24.2 8.7
Foreign 37.2 13.3
Other 3.4 1.2
Total 279.0  

Source: ABS Cat. No: 5232.0

Table A9: Financial System Assets
Per cent of total
1980 1996
Banking groups 56 59
Insurance groups 18 23(a)
Other 29 21

(a) Includes State Bank of NSW and its subsidiaries, which are ultimately owned by Colonial Mutual.

Source: Reserve Bank of Australia

Table A10: Range of Supervisory Functions in Countries
with Broadly-based Supervisors
Country Banks/credit
institutions
Insurance
companies,
pension funds
Securities
companies
Other
“Mega-regulator” outside the central bank
Denmark Credit
institutions
Insurance,
pensions
Securities
companies
Fund
management
Japan Banks Insurance Securities
companies
Fund
management
Norway Credit
institutions
Insurance,
pensions
Stockbrokers Fund
management
Sweden Credit
institutions
Insurance Securities
companies
Fund
management
“Mega-regulator” within the central bank
Singapore Banks Insurance Securities
dealers
Fund
management
Other countries with broadly-based supervisors
Canada Banks Insurance,
pensions
   
Finland
(part of central bank)
Credit
institutions
  Securities
brokers
Fund
management
Germany Credit
institutions
    Fund
management
Malaysia
(central bank)
Credit
institutions
Insurance    
Netherlands
(central bank)
Credit
institutions
    Fund
management
Switzerland Banks   Securities
dealers
(from 1997)
Fund
management
Table A11: Degree of Central Bank Involvement in Bank Supervision
Primary Responsibility Shared Responsibility Little or No Involvement
Australia Germany Austria
Finland Japan Belgium
France Switzerland Canada
Greece US Denmark
Hong Kong   Norway
Iceland   Sweden
Ireland    
Italy    
Luxembourg    
Malaysia    
Netherlands    
New Zealand    
Portugal    
Singapore    
South Africa    
Spain    
UK