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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 crisis 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 wi
