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Australia’s Banking Industry

Date: May 2011 Disclaimer This publication has been prepared as a general overview of the Banking Industry in Australia and does not constitute and is not intended to constitute financial product advice as defined under the Corporations Act 2001 (Cwth). Nothing in this document should be construed as a recommendation or statement of opinion intended to influence a person in making an investment decision. The information is made available on the strict understanding that the Australian Trade Commission (Austrade) is not providing professional advice. While all care has been taken in the preparation of this publication, Austrade expressly denies liability for any loss or damage of any nature (including but not limited to any errors or omissions) arising out of or connected with reliance on the contents of this publication. Any person relying on this publication does so entirely at their own risk. Austrade strongly recommends that the reader obtain independent professional advice prior to making any investment decision. Austrade’s role in the promotion of Australian trade includes facilitating engagement by Australian financial services exporters in markets outside Australia. Austrade is not a promoter of any financial services products or investments and does not provide investment advice. Austrade assumes no responsibility however so arising for any company, product or service mentioned in this document, nor for any materials provided in relation to such products, nor for any act or omission of any business connected with such products. Investors should always make their own enquiries as to whether an investment is appropriate for their needs and should consult an independent and licensed advisor.

Contents
Executive Summary Australia’s Banking Industry Market Participants Banks Credit Unions Building Societies Non-Deposit-Taking Finance Companies Retail Banking Size and Scope Residential Mortgages Credit Cards Margin Lending Deposits Private Wealth Retirement or Superannuation savings Self-Managed Superannuation Funds Government Reforms ‘Competitive and Sustainable Banking’ Commercial Banking and Corporate Finance Scope Market Participants Authorised Deposit-taking Institutions Boutique Advisory Firms and Securities Brokers Specialised Finance Companies Commercial Lending Syndicated Debt Project and Infrastructure Finance Trade Finance Corporate Finance and Advisory Mergers and Acquisitions Equity Capital Markets Debt Capital Markets Asset-backed Securities Kangaroo Bonds Over-the-counter and exchange-traded markets Transaction Services – Payments System Operations Processing Regulation and Tax Environment Regulation of the financial system Overview Australian Prudential Regulation Authority Australian Securities and Investments Commission Reserve Bank of Australia Federal Treasury Australian Competition and Consumer Commission 5 6 9 9 11 12 12 13 13 14 15 16 16 18 18 18 19 21 21 21 21 21 21 22 25 26 28 30 30 30 33 36 37 39 40 40 44 44 44 44 45 45 45 45 Other regulatory agencies Summary of available operating models Overview Australian Credit Licence Available options Summary of requirements for each option The authorisation and application processes Australian financial services licences Introduction What is a financial service? What is a financial product? Retail and wholesale clients Other considerations Privacy laws Anti-money laundering and similar laws New laws to change the way to take security in Australia Taxation Summary Taxation of business profits Taxation treatment of funding options When is interest withholding tax payable? Exemptions from IWT Notional borrowing by an Australian branch of a foreign bank Deductibility of IWT Phasing down Australian IWT for financial institutions Special treatment for offshore banking units Thin capitalisation Useful Links Appendix A – Banking Institutions Appendix B – Credit Unions and Building Societies Appendix C – Foreign Retail Banks in Australia Appendix D – International Expansion of Australia’s Largest Banks Appendix E – Selected Australian Legal and Accounting/Tax Advisors in Financial Services Appendix F – Infrastructure Australia’s Reform and Investment Priorities Appendix G – Capital Expenditure in Australia’s Mining Sector Appendix H – Transaction Services – Payments System Regulation Payments System Access Points Payment Settlements Future Trends 45 46 46 46 46 47 51 52 52 52 52 53 53 53 53 53 54 54 55 55 55 55 56 56 56 57 57 58 59 60 62 64 67 68 70 72 72 72 73 73

Australia’s Banking Industry

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Australia ranked fifth amongst the world’s leading financial systems and capital markets in the 2010 World Economic Forum Financial Development report. .

Foreign banks operating in Australia have also been attracted by our reputation for product innovation. and enviable lifestyle. Australia’s Banking Industry >5 . EFTPOS and ATMs in the country.1 Australia ranked fifth amongst the world’s leading financial systems and capital markets in the 2010 World Economic Forum Financial Development report. A fast growing Kangaroo bond market that has increased from A$9 billion to A$129 billion bonds outstanding over the ten years to October 2010 – a compound annual growth rate of 28 per cent. as reflected in the significant growth in electronic payments. 6 July 2010. there is also increasing competition from foreign banks and regional Australian banks and competition from non-bank lenders (credit unions. Competition in this sector includes the major and regional domestic banks. infrastructure and project finance (including public-private partnerships). building societies and non-deposit-taking specialist finance companies). Australia’s retail banking sector is relatively concentrated. ADIs include banks. advanced capital and risk management systems. Australia’s commercial and corporate advisory market comprises: › › › › › A$620 billion commercial lending market. advanced social and economic infrastructure. Table 6. a foreign bank branch licence or representative office.5 per cent of globally announced deals. and asset finance companies. profitable. Specialist expertise exists in mining and resources. › › › › › Australia’s banking sector has sought to leverage the country’s strengths in natural resources. specialised corporate advisory firms. “Top 1000 World Banks 2010”. securities brokerage companies. Ranked by The Banker. Commonwealth Bank of Australia (CBA). 4. The second largest Equity Capital Market in Asia-Pacific and fifth largest globally. The majority of these foreign competitors are focused on commercial banking and capital market activities. of which the largest component is mortgage lending. and continues to undergo. Gross Value Added by Industry. transparent and highly regarded regulatory environment. While the major Australian banks have dominant market shares across most consumer finance lines. corporate. strong rule of law. Australians are early adopters of new technology. 5206. with announced deals totalling US$132 billion in 2010 and US$528 billion for the five years to 2010. 9 foreign owned subsidiaries). with a capitalisation of US$1.1 per cent of world issuance. were A$2. Australia and New Zealand Bank (ANZ). A securitisation market that has resumed growth following the global financial crisis. 2. around 11 per cent of Australian output or A$135 billion of real gross value added in 2010. chain volume measured. Yen and Pound Sterling. public-private partnerships. sophisticated and well regulated banking sector which is welcoming of new entrants and increasingly engaged in regional and global markets.9 billion in 2008. The US$/A$ pair being the world’s fourth most traded pair after the Euro. up from A$9.072 listed companies. The world’s seventh largest foreign exchange market with total FX turnover averaging US$192 billion per day in April 2010. Australia has four large domestic banks (the “four pillars”) that provide full service retail and commercial lending to the Australian economy.Executive Summary Australia has a strong.1 trillion and 2. The Asia-Pacific’s second largest pension fund industry after Japan. Consumer lending in Australia totalled A$1. The commercial banking and corporate finance and advisory sector incorporates a full range of services provided to commercial. credit unions and building societies. with US$199 billion of equity issuance over the five years to 2010. and property. change designed to increase competition and innovation. Decisions have also been influenced by our political stability. Includes foreign banks with locally incorporated subsidiaries. our highly skilled workforce and our proximity to key regional markets. 1. and sixth largest globally.5 billion in RMBS issuance in 2010. 3. National Australia Bank (NAB). defined as Authorised Deposittaking Institutions (ADIs)2.3 trillion as at October 2010. with US$14.0 – Australian National Accounts: National Income. One of the three largest Mergers and Acquisitions markets in Asia-Pacific. at US$1.6 billion worth of deals in 2010. Dec 2010 (released 02 Mar 2011). A sizeable syndicated loans market that has raised US$336 billion over the five years to 2010. property and related capital market activities. or 15 per cent of the region’s total. infrastructure. Each has a AA rating (Standard & Poor’s) with only nine of the top 100 banks globally enjoying a rating of AA or higher. Australian Bureau of Statistics cat no. The financial sector is the largest contributor to Australia’s national output. The second largest free-floating stock market in the Asia-Pacific region. government and institutional sectors. Australia’s payments system has undergone. 3.3 Foreign banks4 are also well represented in the Australian market with 20 of Forbes’ top 25 banking institutions having a presence in Australia.7 trillion. equivalent to 2.261 billion in 2010 – and. foreign banks. with A$19. Expenditure and Product. The second largest project finance market in Asia-Pacific after India. and Westpac Banking Corporation (WBC). with twenty one banks providing the bulk of banking services to consumers (12 domestic banks. by some measures the fourth largest globally. although a number are now significant players in the retail banking market. agriculture. Total assets of Australia’s banks.

This represents a compound annual growth rate (CAGR) of 13 per cent over the past decade. Superannuation Funds & Other Managed Funds $1. India (102). chain volume measured.9% Life offices. Defined as Authorised Deposit-taking Institutions (ADIs). Australia has the third largest pool of bank assets in the region after Japan and China. Among 21 countries surveyed by the Asian Bankers 500. Statistical Table B1. Assets of Financial Institutions (updated 1 Feb 2011). December 2009.9 trillion in financial sector assets.724b or 55. 6 > Australian Trade Commission . Australia’s total bank assets accounted for around 240 per cent of the country’s nominal GDP. 5206. Dec 2010 (released 02 Mar 2011). 5. Australian Bureau of Statistics cat no.7% Securitisation Vehicles $141. 6. Austrade Australia ranks 12th in the world in terms of bank assets as rated by The Banker.7 trillion accounting for around 56 per cent of the total A$4.707b or 35. China (178).9% Registered Financial Corporations $169b or 3. Table 6.6 stood at A$2. and the regional average (176).6b or 2. South Korea (146).5% Sources: Reserve Bank of Australia.0 – Australian National Accounts: National Income. well above Japan (193).Australia’s Banking Industry The financial sector is the largest contributor to Australia’s national output. Australia’s Financial Sector Assets – September 2010 (A$ Billion) General Insurance Offices $134b or 2. which includes banks. Gross Value Added by Industry. total assets of Australia’s banks. generating more than 10 per cent of Australian output or A$135 billion of real gross value added in 2010. Top 1000 World Banks. Expenditure and Product.5 As at February 2011.0% Authorised deposit-taking Institutions $2. credit unions and building societies.

7 8.5 1. and updated with the 2009 data of banks assets from The Banker 1000 World Banks 2010 and Standard and Poor’s Credit Ratings (downloaded 27 July 2010) from Bloomberg.143.237 833 211 379 182 193 264 118 539 93 161 162 95 42 21 34 10 11 15.8 0. Austrade Australia’s four major banks are amongst the world’s 100 largest by assets and are four of only nine global banks with a rating of AA or higher by Standard & Poor’s.0 230.500 1. 7.00 100.5 40. Austrade The top Australian banks are also within the top 25 banking institutions as ranked by Forbes in its April 2010 top 2.633 Sources: The Asian Banker 500.3 12.5 405.4 2.2 2009 GDP (US$ Billion) 5.388.8 542.57 4.0 17.4 214.1 60.01 0.2 273.6 97.1 Regional Market Share % 35.8 105.000 Australia’s four major banks Assets US$ Billion (as of 31 December 2009) 2.0 103.4 195.000 companies.0 26.6 39.069 4. with stable outlook (18 May 2011).1 14. “Top 1000 World Banks 2010”.47 0.3 8. The Banker.779.853. Issue 101 October 2010.36 0.06 0.000 500 0 AAA AA AAA+ A ABBB+ BBB BBBNR Sources: This chart was sourced from the Reserve Bank of Australia Financial Stability Report March 2009.14 8.The Asian Banker Top 500 Banks Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Country Japan China Australia India Korea Hong Kong Taiwan Singapore Malaysia Thailand New Zealand Indonesia Vietnam Philippines Pakistan Bangladesh Sri Lanka Macau Myanmar Brunei Cambodia TOTAL Numbers of Banks in AB500 123 103 14 43 13 18 35 4 17 14 8 27 19 15 15 17 6 5 2 1 1 500 Total Assets (US$ Billion) 9.9 177.3 268.0 958.258.3 176.09 0.51 32.500 2.8 253.00 Total Assets % of GDP 192.4 27. page 25.5 67.0 17.67 4.1 210.04 0.4 35.2 101.213.9 1.6 1. Graph 38.5 41.48 1.6 67.985 994 1.78 0. Moody’s rating for the four major Australian banks is Aa2. Australia’s Banking Industry >7 .99 0.77 1.41 4. World’s 100 Largest Banks’ Credit Rating 3.24 0.9 27.0 1.35 0.84 0.15 3.9 97. 6 July 2010. GDP data was sourced from IMF World Economic Outlook October 2010.8 145.6 240.7 488.05 0.542. Macau GDP was sourced from Statistics and Census Service Macau.000 1.

1 56. with 20 of Forbes’ top 25 banking institutions having a presence in Australia.8 3.5 26. including the third largest high-net-worth market in the region (after Japan and China).0 50.7 500.3 1.8 3.2 106.355.7 1.3 1.7 2.438.223.4 50.3 56.3 5.2 147. In addition to its geographic position in the Asia-Pacific region.6 150. Austrade Australia is well positioned as a banking centre in the region.4 13. China and India).4 million Australians speak an Asian language (equivalent to around onethird of Singapore’s.0 2.9 2.8 2. The second largest free-floating stock market in the Asia-Pacific with a market capitalisation of US$1.4 1.0 4.428.223.7 184.438.2 1.650.2 167.016.3 49.5 4.2 574.032.0 39.6 3.8 8. A stable political and economic environment.6 15.1 71.0 2.6 5.8 1.6 5.The Forbes World’s Leading Companies Rank1 1 3 5 6 7 8 11 17 21 22 29 34 43 44 48 51 52 53 54 59 67 73 79 83 86 Company JPMorgan Chase Bank of America ICBC Banco Santander Wells Fargo HSBC Holdings BNP Paribas China Construction Bank Barclays Bank of China Lloyds Banking Group UniCredit Group Deutsche Bank Credit Suisse BBVA-Banco Bilbao Vizcaya Banco Bradesco Banco do Brasil Royal Bank of Canada Intesa Sanpaolo Commonwealth Bank Westpac Banking Group Crédit Agricole National Australia Bank ANZ Banking Toronto-Dominion Bank Country USA USA China Spain USA UK France China UK China UK Italy Germany Switzerland Spain Brazil Brazil Canada Italy Australia Australia France Australia Australia Canada Sales 115.0 1.9 23.6 98.1 877.3 Market Value 166. and an enviable quality of life.2 2.0 50.9 48.2 92.7 92.8 78.6 2.6 2. profits.7 55.9 109.5 71. Advanced business and IT infrastructure.8 53. April 2010.3 trillion in funds.7 101.3 59.0 32.9 760.4 420.5 517.5 608. Strong and efficient regulatory environment and legal institutions.3 12. Sources: Forbes.1 35.3 12.3 44.106. and one-fifth of Hong Kong’s entire population).227. › › › › 8 > Australian Trade Commission .4 406.1 59.6 6. Australia offers: › › › › › › › A sizeable domestic economy – the fourth largest in the Asia-Pacific (after Japan. and Mature and innovative financial markets including: A leading pension fund market with A$1.2 65.8 trillion FUM. Australia ranked fifth amongst the world’s 57 leading financial systems and capital markets in the World Economic Forum Financial Development Report 2010.3 2.6 3.2 9.8 53.6 242.0 34.7 178.3 86.6 Profits 11.3 16.5 1. The fourth largest pool of investment fund assets globally with A$1.7 31.7 6. A highly skilled and multilingual workforce where 1.7 75.952.2 trillion. A sophisticated investor base.2 54. close to the world’s fastest growing economies.4 281. The World’s Leading Companies.4 48.243.9 Assets (US$ Billion) 2.6 988.2 107.6 103.1 141.2 63.0 1.2 519. Forbes’ rank according to an equal weighting of sales.8 31. A fast growing and liquid foreign exchange market having grown 12 per cent CAGR since 1998. assets and market value.2 44.150.5 42.1 6.9 6.9 52.

and full service commercial.2 per cent. They accounted for 77. Rabobank has built a strong regional footprint drawing on its rural heritage and is now looking to widen its scale of operations. Bank of Cyprus and Beirut Hellenic Bank.4 trillion as 30 September 2010. with a strong retail base. Includes Bank of Western Australia Ltd (wholly owned subsidiary of the Commonwealth Bank). private banking and distribution to the region. National Australia Bank (NAB) and Westpac Banking Corporation (WBC). There are 56 banks operating in Australia (12 domestic banks. Bendigo Adelaide Bank and Bank of Queensland. Bank of Scotland.4 per cent. businesses and governments – and are prudentially regulated by the Australian Prudential Regulation Authority (APRA). 9 foreign subsidiary banks and 35 foreign branch banks) with total resident assets of A$2. credit unions and building societies – known as Authorised Deposit-taking Institutions (ADIs) – provide the bulk of banking services to Australian households. Citigroup. Commonwealth Bank of Australia (CBA). funds management. 9. The four major domestic banks have the largest market shares in the retail and commercial banking sectors: the Australia and New Zealand Banking Group (ANZ). there are a number of smaller foreign retail banking operations that target specific immigrant groups including the Arab Bank.8 Australia’s banking sector offers opportunities for new entrants providing innovative products and distribution systems. Australian banks are increasingly looking to export their expertise in retail banking. Non-deposit taking finance companies also provide competition in selected consumer credit products. while foreign bank subsidiaries and branches accounted for 13. Australia’s Banking Industry >9 . Banks Australia has a sound. In addition. Deutsche Bank and HSBC have the largest presence as measured by Australian banking assets. trade finance and corporate advisory operations reaching out into the region.49 per cent of resident assets (A$2. September 2010 (issued 29 Oct 2010). internet based model. well capitalised banking sector. Monthly Banking Statistics. Of the foreign banks with a subsidiary or branch licence. ING now ranks fifth in retail banking with its innovative. ING. The largest of the other domestic retail bank competitors are Suncorp-Metway.Market Participants Banks. highly developed wealth management capabilities. APRA.4 trillion) as at September 2010. Macquarie Bank. 8. Bank of China. Its banks are large by global standards. Other domestic banks accounted for 9.

368 156. National Association BNP Paribas Cooperatieve Centrale Raiffeisen-Boerenleenbank B.878 219.046 11.819 16.793 360.592 1.402 20.A. Table 1.452 13.889 10 > Australian Trade Commission .057 14. Ltd The Hongkong and Shanghai Banking Corporation Ltd Top 10 Foreign-owned Bank Branches Other Foreign-owned Bank Branches Total Foreign-owned Bank Branches TOTAL 1.917 11. September 2010 (issued 29 October 2010).812.126 294.605 25.362 2.255 4.483 1.901 7. Deutsche Bank Aktiengessellschaft UBS AG JPMorgan Chase Bank.746 6.449 17.580 1.148 515. N.572 22.433.805 407.A.819 4.363 950 472 107.306 32. Monthly Banking Statistics.877 70. Sources: Australian Prudential Regulation Authority.338 70. Austrade Resident Assets 528.Assets on Australian Books of Individual Banks (A$ Million) September 2010 Westpac Banking Corporation Commonwealth Bank of Australia National Australia Bank Ltd Australia and New Zealand Banking Group Ltd Four Major Domestic Banks Bank of Western Australia Ltd1 Suncorp-Metway Ltd Macquarie Bank Ltd Bendigo and Adelaide Bank Ltd Bank of Queensland Ltd AMP Bank Ltd Members Equity Bank Pty Ltd Rural Bank Ltd Total Other Domestic Banks ING Bank (Australia) Ltd Citigroup Pty Ltd HSBC Bank Australia Ltd Rabobank Australia Ltd Investec Bank (Australia) Ltd Bank of Cyprus Australia Ltd Arab Bank Australia Ltd Beirut Hellenic Bank Ltd Bank of China (Australia) Ltd Total Foreign-owned Bank Subsidiaries Bank of Scotland plc Citibank. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia.484 62.617 15. The Royal Bank of Scotland Plc The Bank of Tokyo-Mitsubishi UFJ.828 8.684 8.813 60.560 41.584 46.211 22.

0 7. More information on this sector is available through ABACUS. IBISWorld Industry Report K7323.230 2. APRA.5 per cent over the same period).11 This growth was driven predominantly by housing loans.5 billion in assets.000 members and around A$7. Queensland accounts for the second largest number.3 per cent of all branches. Credit Unions in Australia. August 2010.595 3. page 16. IBISWorld Industry Report K7323. which represented an increase of 8 per cent over the year. Credit Unions in Australia. page 23 A list of Australian authorised credit unions as at August 2010 is provided in Appendix B.690 2.0 5. Australia’s Banking Industry > 11 . IBISWorld Industry Report K7323. 10. driven by the need to achieve further cost savings through economies of scale.Credit Unions Credit unions operate predominately in the ‘retail’ sector with business driven by deposit taking. Australia’s 107 credit unions had total assets as at September 2010 of A$50. November 2010. IBISWorld estimates that approximately 4 per cent of Credit Union business is with the commercial sector.12 The level of concentration in the credit union sector is significant. at www. There is also a small proportion of commercially focussed business targeted at small and medium-sized enterprises (SMEs).9 billion (up more than 8. Savings & Loans Credit Union (SA) Limited. with 17 per cent of credit union branches.5 Assets 2008-09 (A$ Million) 7.13 The credit union sector is going through a period of consolidation and has seen a number of mergers and acquisitions over the last five years. There are approximately 900 credit union branches around Australia. September 2010 (issued 30 November 2010). 11.7 per cent. Ibid. Police and Nurses’ Credit Society. followed by Victoria with 15.8 per cent of total industry assets. 13.abacus.org.403 2.au.893 Credit Union Australia Ltd Australian Central Credit Union Ltd Savings & Loans Credit Union (SA) Ltd Police and Nurses’ Credit Society NSW Teachers’ Credit Union Sources: Annual Reports. Australian Central Credit Union. consumer credit and housing loan finance. although New South Wales is home to the bulk of these with 43.6 billion. with the top five credit unions – Credit Union Australia Limited. The sector has a diverse range of small and large organisations with the largest credit union having in excess of 400. travel and managed funds as a means of providing greater member value.0 7.5 per cent of market share in terms of total industry revenue and 41. page 23. 12.0 4.10 Many credit unions also distribute products in areas such as health insurance. November 2010. Quarterly Credit Union and Building Society Performance. Credit Unions in Australia. and NSW Teacher’s Credit Union – holding an estimated 42. Top 5 Credit Unions Market Share (% of Revenue) 19. which account for A$33. the peak body representing mutual financial institutions.

0 15.apra. at www. Building Societies in Australia.cfm.e. including a list of registered financial corporations. Resi.14 This growth was driven predominantly by housing loans. Building Societies in Australia.au/ADI/ADIList.9 per cent over the same period). August 2010.au. La Trobe Financial Services. The level of concentration in the building society sector is high.afc. for the purposes of the Financial Sector (Collection of Data) Act. motor vehicles.cfm#AOBC 12 > Australian Trade Commission .org. and asset or lease financing (i. 17.0 17.5 billion (up 9. Building Societies in Australia.asn.abacus. credit cards. Rate Busters and Home Star. 15.gov. and the Australian Equipment Lessors Association.114 6.6 billion.17 Top 4 Building Societies Heritage Building Society Limited Newcastle Permanent Building Society Illawarra Mutual Building (IMB) Society Greater Building Society Market Share (% of Revenue) 25.15 Building societies tend to target their financing in niche and rural markets that are not adequately covered by the banks. with less than 10 per cent of their activities estimated to be in the commercial sector. These institutions do not take deposits but have traditionally provided strong competition in consumer lending. Similarly to credit unions. they are not required to hold a banking license. Examples of non-deposit-taking finance companies in Australia include GE Money.106 Source: Annual Reports.303 4. APRA website at www. Quarterly Credit Union and Building Society Performance. Further information. at www.au. the bulk of building society business is in the retail sector.Building Societies Australia’s 11 building societies had total assets as at September 2010 of A$24. Assured Home Loans. IBISWorld Industry Report K7322.4 Assets 2008-09 (A$ Million) 7. with the top four having around 80 per cent of industry revenue and over 95 per cent of industry assets. the peak body representing mutual financial institutions. furniture). once they reach a certain size (total assets exceeding A$5 million). page 21 A list of Australian authorised building societies as at August 2010 is provided in Appendix B.asn. August 2010. which account for A$16. APRA.au. which are home to an estimated 86 per cent of the industry’s establishments. they are generally required to register as a registered finance corporation. Liberty Financial. More information on this sector is available through the Australian Finance Conference at www.apra. AIMS Financial Group. Ibid. Non-Deposit-Taking Finance Companies Non-deposit-taking finance companies represent another significant group of institutions that service the retail banking sector in Australia. such as mortgage lending.au/RFC/Registered-Financial-Corporations. which represented an increase of 8. is available from the APRA website at http://www. IBISWorld Industry Report K7322. 2001. More information on this sector is available through ABACUS. September 2010 (issued 30 November 2010).gov. 14.444 4..0 22. However. As these institutions do not take deposits. 16. 18.aela. computers.16 They are predominantly located in NSW and Queensland. August 2010. IBISWorld Industry Report K7322.7 per cent over the year.

defined as loans and advances to households. Sources: Reserve Bank of Australia. Australia’s Consumer Credit (Incl.6 per cent. total housing and other personal credit from Australia’s financial intermediaries reached A$1. The four major banks accounted for 87 per cent of all household loans. representing almost A$1.000 A$ Billion 800 600 400 200 0 Oct-2000 Dec-2000 Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005 Year End Dec-2006 Dec-2007 Dec-2008 Dec-2009 Oct-2010 Note: The number in the brackets represents compound annual growth rate since 2000.1 trillion as at September 2010. There are 12 domestic banks and nine foreign bank subsidiaries in Australia – see Appendix A for full list of banks. Austrade Banks provide the majority of credit to Australian households with a market share of 83 per cent. while the other domestic banks accounted for 7.4 per cent. at a compound annual growth rate (CAGR) of 12.5%) Mortgage – Investor (13.6 per cent – although in more recent years this growth rate has slowed to single digits.200 1.2%) 1.3 trillion.400 Mortgage – Owner-occupier (13. A$ Billion 1.Retail Banking Size and Scope Consumer lending in Australia has continued to grow rapidly over the past decade. Statistical Table D2 Lending and Credit Aggregates (Last updated 30 Nov 2010). accounted for 70 per cent of total bank loans and advances. The table following provides an overview of household loans held by banks as at 30 September 2010. As at October 2010.4%) Other personal (7. Consumer lending in Australia. Australia’s Banking Industry > 13 . House lending for owner occupiers and investors accounted for 89 per cent of total consumer credit outstanding. Banks providing deposit-taking services to the household sector are required to be locally incorporated and are prudentially regulated by APRA. and foreign bank subsidiaries held 5. Securitisation) – Year End.

199 116 141 46 222 23 – 15. Austrade Residential Mortgages The residential mortgage market in Australia is by far the largest category of loans to households.au/ 14 > Australian Trade Commission . borne by the lender and often passed on to the borrower.Loans and Advances to Household on Australian Books of Individual Banks (A$ Million) Households Credit Cards 9.442 3.167 3.029 1.862 585 1.429 301. This is an additional charge.5 per cent p.900 13.653 Total 291.gov. bank mortgage loans for owner-occupied and investment properties have increased much faster (13.830 2.375 101. Australian Taxation Office http://www.566 5. Tax laws are favourable towards residential property ownership. residential property) and the loan amount. 19. Sources: Australian Prudential Regulation Authority.792 7.ato.029 – 4.785 2.724 9.341 Other 15.910 126 208 167 122 189 16 35. If their property expenses exceed their property income.698 12.133 162 143 8 141 1 – – 1.593 Housing: Investment 82.745 266. This has provided homogeneity across the national mortgage market and places greater responsibility for the loan on the borrower than has been the case in some overseas jurisdictions. Table 2.).260 6 267 – 359 – 137 2.403 9.614 562.520 417 144 9.455 1.g.665 4.755 27.170 8.098 107. with capital gains tax exempt for owner occupiers and discounts of up to 50 per cent available for investors who own for periods greater than 12 months.2 per cent p.240 2.021 27.632 6. these expenses can be ‘negatively geared’ against other personal income sources. including other income sources.084.904 40.861 173.516 315 4.418 769 33.607 41.586 991 – – – – – – 5. lenders require such insurance where the borrowers’ loan to valuation ratio exceeds 80 per cent.199 8.631 5.946 7. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia. Typically.592 902. Monthly Banking Statistics.397 8.166 49.101 7.863 569 670 2. Australian laws place full recourse lending to residential mortgages in Australia at a national level. Australia’s market is characterised by high levels of Lender’s Mortgage Insurance. which serves to meet any shortfall arising between the proceeds from foreclosure on the collateral (e.207 252.993 18.706 170.659 36.978 77.458 4..981 676.151 – 1.079 21.099 6.588 67.262 385 357 354 345 212 16 58.a) than other consumer credit (7. September 2010 (issued 29 October 2010).603 17.222 1.842 29.806 56.a.028 9.190 79.635 September 2010 Westpac Banking Corporation Commonwealth Bank of Australia National Australia Bank Limited Australia and New Zealand Banking Group Ltd Four Major Domestic Banks Bank of Western Australia Ltd1 Suncorp-Metway Ltd Bendigo and Adelaide Bank Ltd Bank of Queensland Ltd Macquarie Bank Ltd AMP Bank Ltd Members Equity Bank Pty Ltd Total Other Domestic Banks ING Bank (Australia) Ltd Citigroup Pty Ltd HSBC Bank Australia Ltd Arab Bank Australia Ltd Bank of China (Australia) Ltd Bank of Cyprus Australia Ltd Beirut Hellenic Bank Ltd Rabobank Australia Ltd Investec Bank (Australia) Ltd Total Foreign-owned Bank Subsidiaries TOTAL Housing: Owner-occupied 184.575 1. representing 90 per cent of all bank lending to the household sector. Since 2000.304 12.755 169.965 31.577 38.19 Investors can also offset the interest expenses and property costs against their income.028 122.754 17.

Statistical Table C1 Credit and Charge Card Statistics (Last updated 30 Nov 2010). As at October 2010. Austrade Credit cards are provided by domestic and foreign banks. Within the banks. transactions and balances outstanding.200.22 The foreign bank share of the credit card market is dominated by two institutions. Many of Australia’s largest retailers. 22. fees and charges associated with the credit provided (including a change in repayments due to the ending of a ‘honeymoon’ interest rate period). Includes Bank of Western Australia Ltd (wholly owned subsidiary of the Commonwealth Bank).000 8 6 20. Citigroup and HSBC. Under these laws. all the repayments. The Act largely replicates the previous statebased Uniform Consumer Credit Code (UCCC).6 per cent.000 A$ Million Number of Accounts ('000.000 16 14 50. David Jones. with a total balance outstanding of A$48 billion. In recent years. the four major banks account for 83.In July 2010. Credit Cards The credit card market in Australia has grown steadily over the past decade in terms of number of accounts. is properly informed of their responsibilities and that loans are not written in an unfair or misleading manner. credit unions. while other domestic banks account for 1. there were 14. regulatory oversight for consumer credit protection laws was transferred from the state governments to the federal government under the National Consumer Credit Protection Act 2009. with Citigroup having the bulk of credit card loans outstanding (around 12 per cent market share).20 The average outstanding balance is around A$3.000 Balances Outstanding (A$ Million. LHS) 4 2 10.000 0 Mar-2008 Sep-2008 Mar-2009 Sep-2002 Sep-2003 Sep-2004 Sep-2005 Sep-2000 Sep-2006 Sep-2001 Sep-2007 Sep-2009 Mar-2002 Mar-2003 Mar-2004 Mar-2005 Mar-2000 Mar-2006 Mar-2001 Mar-2007 Mar-20010 Sep-20010 0 Sources: Reserve Bank of Australia.6 per cent21 of total bank credit card loans outstanding. Myer and Woolworths have credit card offers. some banks have provided white labelling services to other mass market channels such as retailers and airlines. 20. These laws are designed to protect Australian consumers from predatory or unscrupulous lending practices. For further information see Regulatory and Tax Environment section. 21. September 2010 (issued 29 October 2010).7 million credit card accounts in Australia. Reserve Bank of Australia. Monthly Banking Statistics. Not Seasonally Adjusted) 60.4 per cent. Harvey Norman. such as Coles. Credit and Charge Card Statistics as at October 2010. 14. the equivalent of 87 per cent of Australia’s adult population. ‘millions 30. building societies and some specialised credit card providers. Australia’s Credit and Charge Card Statistics (Values and Number. Australian Prudential Regulation Authority. and foreign banks.000 12 40. Australia’s Banking Industry > 15 . Table 2. the provider is to access the borrower’s capacity to repay. RHS) 10 Number. Statistical Table C1. The emphasis is placed on the provider to ensure that the borrower has the capacity to borrow. the fifth largest provider after the major domestic banks.

This represents a compound annual growth rate of 13. and excludes transactions. credit unions and building societies were A$1. assets and liabilities with offshore. total deposits23 (retail and corporate/wholesale) held by banks. Includes foreign owned subsidiary and foreign branch licenced banks. 25.000. 16 > Australian Trade Commission .000 200. B7 and B8. includes transactions of Australian-based offshore banking units. 23.8 billion. there are 205. with the remainder sourced from businesses.000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 Sources: Reserve Bank of Australia. with a mean loan size of A$91.725 per cent of all deposits. Includes Bank of Western Australia Ltd (wholly owned subsidiary of the Commonwealth Bank). Australia’s Margin Lending (September each year) 40 35 30 25 Number of Accounts Margin Lending Credit Outstanding (A$ Billion) 250. Margin lending is borrowing to invest in financial securities – typically listed shares or managed funds. The domestic books of a bank has the following scope: includes operations/transactions booked or recorded inside Australia.000 5 100. governments and institutions. balances outstanding on margin loans grew at 10 per cent (CAGR) to A$17.000 150.000 client accounts.8 billion and accounted for 37 per cent of total bank deposits. excludes offshore branches. Statistical Table D10.7 per cent since September 2005. The following table provides an overview of household deposits held by banks24 as at 30 September 2010. Today. Growth was rapid during the seven years to 2007. Reserve Bank of Australia.5 per cent.000 20 15 10 50.0 per cent. statistical tables B3. The four major banks accounted for 78. excludes transactions of overseas-based offshore banking units.Margin Lending Margin lending has developed as another consumer credit product over the past two decades. Over the ten years to September 2010. Deposits sourced from households amounted to $477. significantly up from A$780 billion five years ago.485 billion. borrowers are issued a ‘margin call’ that requires them to either add cash to their margin account or to sell down existing securities to bring the loan back under the LVR limit. Austrade Deposits As at September 2010. but reduced following the global financial crisis. while the other domestic banks accounted for 10. Banks account for 95 per cent of these deposits. 24. Quarterly statistics published by the Reserve Bank of Australia indicate that the average loan to security valuation is 37. Each individual security can be leveraged up to a set loan to value ratio (LVR). does not consolidate Australian or offshore controlled entities. If the securities’ move outside of the allowed valuation limit. 26.4 per cent and foreign banks26 11.

232 4.794 3.771 14.622 33.440 3.815 Total Deposits 288.485 3. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia.741 42. Ltd Cooperatieve Centrale Raiffeisen-Boerenleenbank B.008 113.320 1.095 3.295.247 83.785 27.907 216.670 4.541 3.527 976.146 7. Sumitomo Mitsui Banking Corporation The Northern Trust Company Mizuho Corporate Bank.586 4.896 1.865 66.370 1.170 980 780 311 58.696 52.876 6.624 12. N. Table 4.015 14.390 29.518 Sources: Australian Prudential Regulation Authority.265 14.A.730 31. September 2010 (issued 29 October 2010).929 27.271 1. Deutsche Bank Aktiengessellschaft Bank of Scotland plc The Royal Bank of Scotland Plc The Bank of Tokyo-Mitsubishi UFJ.778 6.095 2.256 1.559 276.186 3.524 176. Monthly Banking Statistics.608 5.050 17. Ltd Top 10 Foreign-owned Bank Branches Other Foreign-owned Bank Branches Total Foreign-owned Bank Branches TOTAL 1. Households 130.748 194. Austrade Australia’s Banking Industry > 17 .417 32.349 17.058 64.680 7.426 3.830 242 377 459 491 309 30.966 2.840 374.935 0 59 59 477.977 1.254 72.017 12.A.766 6.Deposits on Australian Books of Individual Banks (A$ Million) September 2010 Commonwealth Bank of Australia Westpac Banking Corporation National Australia Bank Ltd Australia and New Zealand Banking Group Ltd Four Major Domestic Banks Bank of Western Australia Ltd1 Bendigo and Adelaide Bank Ltd Suncorp-Metway Ltd Macquarie Bank Ltd Bank of Queensland Ltd Members Equity Bank Pty Ltd Rural Bank Ltd AMP Bank Ltd Total Other Domestic Banks ING Bank (Australia) Ltd HSBC Bank Australia Ltd Citigroup Pty Ltd Rabobank Australia Ltd Investec Bank (Australia) Ltd Arab Bank Australia Ltd Bank of Cyprus Australia Ltd Beirut Hellenic Bank Ltd Bank of China (Australia) Ltd Total Foreign-owned Bank Subsidiaries BNP Paribas Citibank.

household consumer durables (including market values of motor vehicles. See also Austrade’s data alert http://www.600. which by some measures is the fourth largest pool of savings globally.pdf.30 The majority of these superannuation savings are managed by trustees of APRA-regulated superannuation funds and invested at arms-length by professional investment managers. See the Australian Governments ‘A tax plan for our future’ http://www. See Austrade’s publication on the Private Banking Industry in Australia http://www. unfunded superannuation claims and all other). superannuation funds and friendly societies.gov.Private Wealth Private wealth is a key driver of retail deposit demand.futuretax. Each SMSF can have up to four members.aspx Retirement or Superannuation savings In addition to voluntary savings.pdf.4 per cent to reach 173.gov. shares and other equity.austrade.gov. as at December 2009. can only be accessed their preservation age. where all members are required to be trustees. deposits. Australia’s total private sector wealth (including consumer durables. with a combined value of US$519 billion.aspx 29.austrade.aspx Self-Managed Superannuation Funds Self-Managed Superannuation Funds (SMSFs) are a superannuation fund managed by the members themselves as trustees of the fund. self-managed superannuation and other investment assets) stands at A$1.29 The pool of investment fund assets (including mandatory pension.gov. assets of life offices. Merrill Lynch Capgemini. Data sourced from Reserve Bank of Australia. SMSFs now hold A$420.pdf.gov. dwellings.au/pages/FairerSuperannuation.austrade.pdf.6 billion.3 trillion superannuation pool.au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia.28 The number of HNWI in Australia.397 over the past 12 months.560 to 439.27 Australia was the third largest high net worth individual (HNWI) market in the Asia-Pacific region and the 10th largest in the world in 2009. furnishings and other household equipment).au/ArticleDocuments/2792/Investment-Management-Industry-inAustralia. or 32 per cent of the nation’s A$1. and household and unincorporated enterprises’ financial assets (including deposits. See Austrade’s publication ‘Investment Management Industry in Australia’ http://www. accounting for 5. Australia’s private wealth market now ranks among the largest and fastest growing in the world.3 per cent per annum to A$6. Private wealth is defined as the sum of household dwellings. World Wealth Report 2010 and Asia-Pacific Wealth Report 2010. shares and other equities.8 per cent of their assets to cash and short-term deposits in September 2010. Since 1990.au/ArticleDocuments/2792/Private-Banking-in-Australia-Publication. See Austrade’s publication on the Investment Management Industry in Australia http://www.austrade. generally speaking. and reserves of life offices and pension funds) grew by 8.4 per cent of the region’s total wealth. The latest Multiport SMSF Investment Patterns Survey October 2010 revealed that SMSF members allocated 21.aspx 30. 28. grew 34.aspx 18 > Australian Trade Commission . defined as persons with greater than US$1 million in investable assets.au/ ArticleDocuments/2792/Data-Alert-101013-Asia-Pacific-Wealth-Report. 27. Recently. Australia has a mandatory retirement or superannuation savings regime which requires 9 per cent of income to be deposited in superannuation accounts which. Statistics released by the Australian Prudential Regulation Authority in December 2010 show that the number of SMSFs grew from 412.7 trillion. the Government foreshadowed its intention to introduce legislation to gradually increase the compulsory level of superannuation savings to 12 per cent by 2019-20. Australia had almost 6 per cent of the region’s HNWI population.8 trillion. Statistical Table B20.

8 38.1 334.3 56. Sources: Australian Prudential Regulation Authority Statistics.2 35.075. Austrade Government Reforms: ‘Competitive and Sustainable Banking’ In December 2010. › › › Stream One: Empower consumers to get a better deal. The current cap is A$1 million per depositor per ADI.0 390.5 175.2 225.pdf Australia’s Banking Industry > 19 .929 – 406.2 190 67 40 166 463 82 4. have the protection of the Financial Claims Scheme (FCS) in the unlikely event that the entity is wound up.0 795. up to a certain cap. The FCS.3 339.9 1.675 Balance of Life Office Statutory Funds a. Full details of the Government’s announced banking reforms are available from the Treasury website: http://www. Estimated data on self-managed superannuation funds are provided by the Australian Taxation Office (ATO). to help consumers identify that their deposits.treasury.6 0.7 2. Total assets does not include pooled superannuation trusts.277 112 401. banning exit fees on new home loans. b.8 153. which was introduced in October 2008. The Government will also introduce a new official ‘Government Protected Deposits’ symbol for ADIs.7 703.5 1.gov. titled ‘Competitive and Sustainable Banking System’.0 304. and a community awareness and education campaign.1 1. June 2010 (issued 9 September 2010). This is a further A$4 billion investment.5 69. the Australian Government announced three broad streams of reform across the Australian banking system.Superannuation Industry in Australia Assets (A$ Billion) Jun 2009 Jun 2010 By fund type Corporate Industry Public Sector Retail Sub Total Pooled Superannuation Trusts Small APRA funds Single-member ADFs Self-managed Super Funds TOTALB a Number of Entities Jun 2009 Jun 2010 54. is to be made a permanent feature of the Australian financial architecture and the Government has been working with the Council of Financial Regulators to determine an appropriate cap to apply from October 2011 onwards. These reforms are aimed at boosting consumer flexibility to transfer deposits and mortgages.198 – 432.0 0. Quarterly Superannuation Performance.227. The Government has tasked the Treasury to design bullet RMBS structures and will amend the Banking Act 1959 to allow Australian banks. Stream Two: Support smaller lenders to compete with big banks. empowering the Australian Competition and Consumer Commission (ACCC) to prosecute anti-competitive price signalling.au/banking/content/_downloads/competitive_and_sustainable_banking.9 79.0 191. Funding sources will be supported through additional Government investments in high quality AAA-rated Residential Mortgage Backed Securities (RMBS). Stream Three: Secure the long-term safety and sustainability of our financial system. credit unions and building societies to issue covered bonds. regulated by APRA.869 103 428. taking the total Government support to RMBS since the financial crisis to A$20 billion.863 168 65 39 154 426 79 3.

.

Royal Bank of Scotland. Securities brokers or stockbrokers are generally categorised as either institutional or retail. http://www. large corporates. and others have a substantial commercial banking presence here. HSBC. including: Moelis & Company. there is a growing number of emerging market banks that have entered Australia. and a further 35 as a foreign bank branch. Included in this category are the larger accounting firms that have a corporate advisory arm. Many foreign banks providing commercial banking and corporate advisory services are also active in investment and asset management. syndicated loans and project finance.gov. vendor finance companies.pdf.aspx 32. as well as Australian companies interested in entering their markets. non-deposit-taking specialised finance companies provide an alternative source of financing for corporations and institutions.au/ADI/ADIList. › › › Corporate Finance and Advisory: Mergers and Acquisitions – M&A. UBS. and real estate. Specialised Finance Companies As in the consumer lending area. Such institutions include asset finance and leasing companies.au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia. 31. government and institutional bonds.Commercial Banking and Corporate Finance Scope Services to the commercial sector can be segregated into a number of core markets:31 › › Commercial Lending – Intermediated lending to SMEs. This sector is covered in Austrade’s Investment Management Industry in Australia publication. as well as a range of smaller specialist boutique firms. In addition.32 There has been a re-alignment of foreign bank operations in Australia following the global financial crisis – changes in Australia largely reflect outcomes of parent banks. the Australian operations of a number of foreign owned institutions were hit hard by effects in their home markets. 2010. agriculture. Many of these firms provide auxiliary services in capital market financing. Leading houses such as Citibank.gov. JPMorgan. Boutique Advisory Firms and Securities Brokers Corporate advisory firms and small specialist finance companies provide competition in niche areas such as mergers and acquisitions advisory. mining and resources. demergers and other advisory. underwriting. Gresham Partners. particularly from China and India. primarily focused on servicing their corporate clients in Australia. and Debt Capital Markets – corporate. Equity Capital Markets – Initial public offerings (IPOs).apra. Market Participants Authorised Deposit-taking Institutions There are 56 banks licensed to service wholesale clients in Australia and a further 16 banks with representative offices. infrastructure and project finance. Palladio Partners. This sector was significantly affected by the financial crisis due to its dependence on wholesale markets and securitisation to fund its activities. Source: APRA website at http://www. secondary raisings. Australia’s commercial and corporate advisory sectors are known for specialised expertise in particular industries including energy.austrade. In addition. A list of authorised banking institutions in Australia is provided in Appendix A. factoring or inventory finance companies and specialised trade finance companies. Nine foreign banks operate with a subsidiary license. institutions and government. structured finance – securitisation. Caliburn Partnership and BKK Partners. Deutsche Bank.cfm Australia’s Banking Industry > 21 .

ING and BNP Paribas. the major domestic banks account for 72 per cent34 of bank loans to non-financial corporations. Statistical Table D5 Lending and Credit Aggregates (Last updated 30 Nov 2010). with many companies choosing to increase the proportion of their capital funded from equity (see Equity Capital markets section). Regional banks.1%) 400 300 200 100 0 Dec-2000 Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005 Year End Dec-2006 Dec-2007 Dec-2008 Dec-2009 Oct-2010 Note: The number in the brackets of the legends represents the compound annual growth rate since 2000. Lending and Credit Aggregates (last updated 30 November 2010). while the largest foreign bank competitors in non-financial commercial lending are Rabobank. A$ Billion. Coinciding with this. As at February 2011.4 per cent in 2010. commercial lending has been in decline. Sources: Reserve Bank of Australia. APRA. a wholly owned subsidiary of the Commonwealth Bank of Australia. credit unions and building societies provide some additional competition in the smaller enterprise sector and niche areas such as rural and agricultural organisations. Australia’s Bank Commercial Lending – Finance and Non-Finance (Year End. leasing companies and other non-deposit taking finance companies provide specialised lending. Reserve Bank of Australia. government organisations and SMEs. Statistical Table D2.Commercial Lending The level of total business loans outstanding from Australia’s financial institutions was in excess of A$620 billion as at October 2010. Lending grew more rapidly in the early part of the decade and in 2007 and 2008 there was a market shift to intermediated lending as debt capital markets became more difficult to access. Includes Bank of Western Australia. 34. while the other domestic banks account for 9 per cent and foreign banks 19 per cent. May 2010 (issued 30 June 2010).8%) Non-financial sector (11.1 per cent over the ten years to October 2010. 35.6 per cent in 2009 and 2. 22 > Australian Trade Commission . subtracting 6. Austrade The major domestic banks provide the bulk of commercial intermediated lending in Australia. Similarly. equity capital markets saw a rise in secondary market issuance. with lending to the financial sector growing at 18. which includes loans to large corporates. Bank of Tokyo-Mitsubishi.35 33. financial institutions. Since 2008. Suncorp-Metway and Bendigo Adelaide Bank are the most significant competitors in the regional domestic banks. Monthly Banking Statistics.8 per cent CAGR over the same period. Excluding Securitisation) 800 700 600 500 A$ Billion Financial intermediaries (18.33 Commercial Lending credit to the non-financial sector grew at a CAGR of 11.

Table 2.214 4.001 3. Sources: Australian Prudential Regulation Authority.297 3.Loans and Advances to Corporations on Australian Books of Individual Banks (A$ Million) September 2010 National Australia Bank Ltd Australia and New Zealand Banking Group Ltd Westpac Banking Corporation Commonwealth Bank of Australia Four Major Domestic Banks Bank of Western Australia Ltd1 Suncorp-Metway Ltd Bendigo and Adelaide Bank Ltd Macquarie Bank Ltd Bank of Queensland Ltd Rural Bank Limited AMP Bank Limited Members Equity Bank Pty Ltd Total Other Domestic Banks Rabobank Australia Ltd ING Bank (Australia) Ltd HSBC Bank Australia Ltd Investec Bank (Australia) Ltd Bank of Cyprus Australia Ltd Arab Bank Australia Ltd Beirut Hellenic Bank Ltd Citigroup Pty Ltd Bank of China (Australia) Ltd Total Foreign-owned Bank Subsidiaries The Bank of Tokyo-Mitsubishi UFJ.001 3.856 4.360 7.476 56.009 5.287 3. Ltd BNP Paribas The Royal Bank of Scotland Plc Sumitomo Mitsui Banking Corporation Mizuho Corporate Bank.572 587 70 64.252 3.840 7.400 5.795 477.347 324.357 842 526 405 31 0 21.313 17.144 69.617 2.157 74.674 40.195 5.297 3.616 65.179 22.197 2.292 1.A.410 10. Ltd Bank of China Limited UBS AG ING Bank N.748 424.574 43.936 7.673 284.696 2. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia.075 6.265 23.728 5.689 698 397 76 1.543 4.099 56.V.661 3.574 38.253 0 0 5 19 2.687 2.757 8.816 Financial Corporations 9.747 63.121 5.703 11.572 583 51 62.287 3.131 1.181 2.921 4.668 12.370 71.256 11.147 5.687 2.517 9.477 Total 102. September 2010 (issued 29 October 2010).057 2.530 4.649 18.933 4. Austrade Australia’s Banking Industry > 23 .448 0 0 99 0 0 63 0 131 0 293 347 200 981 398 687 121 1.097 2. Monthly Banking Statistics.047 52.547 6. Top 10 Foreign-owned Bank Branches Other Foreign-owned Bank Branches Total Foreign-owned Bank Branches TOTAL Non-financial Corporations 92.306 79.357 842 589 405 162 0 21.059 4.011 17.361 0 436 0 4.954 24. The Hongkong and Shanghai Banking Corporation Ltd Cooperatieve Centrale Raiffeisen-Boerenleenbank B.

5 Total 256.3 35.6 691.5 80.3 101.6 43.7 6.8 23.6 12. Austrade Growth in lending by industry sector has varied considerably over the past 10 years.4 298.000 44.7 43.9 275. borrowing over A$2 million.7 19.8 75.3 24.5 39.5 7.8 9.4 45.3 8.4 298.8 124.1 70.8 100. Statistical Table D7 Bank Lending To Business (Last updated 16 Sep 2010).2 31.6 67.0 1.0 298. wholesale and retail trade.3 9.5 525.7 338.8 44.5 123.5 31.0 2.6 76.3 4.9 64.7 164.2 93.9 Total 256.0 658. Austrade 24 > Australian Trade Commission .3 7.1 649.6 297.2 66.4 $100 000 to < $500.0 34.9 29.1 39. Loans to SMEs have grown more gradually during this period.8 284.0 9.0 9.7 6.1 126.6 338. Statistical Table D7 Bank Lending To Business (Last updated 16 Sep 2010).000 Jun-2000 Jun-2001 Jun-2002 Jun-2003 Jun-2004 Jun-2005 Jun-2006 Jun-2007 Jun-2008 Jun-2009 Jun-2010 Share % CAGR % 22.9 464.4 10.2 40.1 439.1 5.3 37.9 Sources: Reserve Bank of Australia. the fastest growing segment of commercial lending in Australia has been to larger corporations.4 49.8 29.5 6.1 13.5 28.2 53.4 11.1 46.7 57.5 173.3 Other 109.3 101.7 196.0 42.8 31.2 320.3 43.9 Sources: Reserve Bank of Australia.1 248.2 92.6 338.3 Manufacturing 30.4 70.1 215.9 14. etc Jun-2000 Jun-2001 Jun-2002 Jun-2003 Jun-2004 Jun-2005 Jun-2006 Jun-2007 Jun-2008 Jun-2009 Jun-2010 Share % CAGR % 23.2 153.7 25. transport. Australia’s Bank Lending To Business – Total Credit Outstanding by Size (A$ Billion) Under A$100.4 42.0 4.1 103.5 24.9 374.1 40.9 43.1 439.0 28.3 10.4 87.1 12.0 658.8 14. The fastest growing segments have been finance and insurance.3 $500 000 to < $2 Million 39.5 7.8 24.2 26.8 100.7 28.3 50.6 22. Retail Trade & Transport Finance & Construction & Storage Insurance 13.1 2.1 10.7 133.9 49.0 72.Over the past ten years.6 62.5 41.1 23.4 21.2 133.3 54.6 691.7 489.1 649.5 47.4 11.6 169.4 17.8 284.7 11.1 19.8 30.1 70.9 204.4 15. Fishing.4 59.2 25.9 374.3 24.2 50.8 Wholesale Trade.0 449.6 268.5 93.3 60.2 164. storage.0 $2 Million and Over 151.0 23.9 54.8 Mining 7.2 5.7 39. agriculture and fishing.5 15.0 45.0 34.2 4.2 74. Australia’s Bank Lending To Business – Total Credit Outstanding by Sector (A$ Billion) Agriculture.8 67.7 24.7 47.0 9.4 123.5 525.3 26.1 10.2 57.9 275.

The energy and power sector was most active.1 per cent of the global market. with combined market share of 57 per cent of total syndicated loan proceeds (24 per cent. up 49 per cent from the previous year. power and financials were the most active. Industrials. with a market share of 21 per cent. in terms of both arrangers and bookrunners. with total proceeds of US$66 billion. Full Year 2010. Credit Agricole and HSBC. Mitsubishi.1 per cent of the world market and around 13 per cent of the Asia-Pacific region. Australian activity represents around 2. 17 per cent and 16 per cent respectively). Global Syndicated Loans Review. Austrade On a five year total basis. Australian syndicated loan activity exceeded US$330 billion. Global Syndicated Loans Review. Australia’s total syndicated loans represent around 2. Sumitomo Mitsui. Australia’s Banking Industry > 25 . Australian Syndicated Loans Ranking Mandated Arranger ANZ Banking Group Westpac Banking Commonwealth Bank of Australia National Australia Bank RBS Mitsubishi UFJ Financial Group Sumitomo Mitsui Financial Group Inc JP Morgan Credit Agricole CIB HSBC Holdings PLC 2010 Rank 1 2 3 4 5 6 7 8 9 10 2009 Rank 1 3 2 4 7 9 10 18 8 12 Bookrunner ANZ Banking Group Westpac Banking Commonwealth Bank of Australia National Australia Bank RBS JP Morgan Bank of China Ltd Mitsubishi UFJ Financial Group Mizuho Financial Group HSBC Holdings PLC 2010 Rank 1 2 3 4 5 6 7 8 9 10 2009 Rank 3 1 4 2 6 16 14 9 7 18 Sources: Thomson Reuters. Australian mandated loans rose by 42 per cent for this same period. energy.7 trillion.37 Significant foreign competitors include RBS. Full Year 2010. Bookrunner is the main underwriter to the issue. real estate (14 per cent) and telecommunications (9 per cent).Syndicated Debt Global syndicated lending for the year to December 2010 totalled US$2. 37.36 The four major banks are prominent in this market. Thomson Reuters. JP Morgan. Other major sectors included materials (14 per cent). 36.

2 89.205. The Asia Pacific (including Japan) accounted for 47.7 4.4 39.8 0.4 579.3 7.5 0.2 43.5 139.3 41.718.4 336.2 per cent of global activity (US$97.3 7.1 123.9 3.4 389.0 2.3 29.4 7.174.5 70.0 137.5 1.9 33.624.8 4.2 289.5 694.8 5. Project Finance Review. According to the latest survey of Reuters Thomson.3 45.8 7.735.5 46.7 533.6 2.8 31.6 billion38.2 0.1 1.8 9.0 1.7 33.6 4. with 587 deals valued at US$206. 2008 and 2007.2 1.7 0.9 3.5 3.8 0. Austrade Project and Infrastructure Finance The global project finance market showed a significant rebound in 2010.0 1.0 Asia-Pacific/Central Asia610.2 11.2 1.0 122.8 0.036. Fourth Quarters of 2009.8 0.4 41.6 100.6 1.4 5.3 67.2 110.089.9 56.0 2.2 13.3 per cent and Asia Pacific.7 196.Worldwide Syndicated Loans 2010 2009 2008 2007 2006 2006-2010 Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % Global By country USA Japan UK Germany France Canada Australia Taiwan UAE Hong Kong Singapore Brazil Mexico New Zealand Malaysia By Region Americas Europe Africa/Middle East 1.9 255.222.2 1.9 96.3 0.0 1.0 7.0 2.0 1. Australia has remained the second most active market in the region.339.1 6.0 3.4 22.3 820.3 100.2 2.6 1. The nation has a long history of engagement in the infrastructure sector.9 1.8 104.4 per cent compared to the previous year.1 1.1 226.9 7.9 29.617.1 22.326.0 104.5 Sources: Thomson Reuters Global Syndicated Loans Review.4 38.1 66.8 0.0 5.5 118.9 6.7 71.4 2.6 per cent.9 3. behind India.3 314.5 15.5 0.2 0.0 1.0 30. which accounted for 15 per cent of the region’s total.9 100.4 16.9 20.6 19.0 5.6 billion.5 3.925.7 100.8 1.7 7.6 7.5 470.2 per cent in 2009 (US$57.1 18.5 11.8 0.2 4.9 5.590.1 0.6 11.2 3.7 19.4 608.9 163.386. Europe/Middle East/Africa (EMEA) increased 28.2 5.4 216.6 16.6 1.4 1.1 22.7 31.4 0.1 303.8 231. Full Year 2010.7 3.0 3.6 48.2 82. with the largest rise.5 billion).2 100.3 25.0 0.7 0. 38. Thomson Reuters.2 470.1 52.3 0.981.7 10.4 11.5 39.0 0.1 40.0 100.8 33.5 4.6 80.3 4.2 95.8 31.0 0.5 0.6 505.6 0.4 784.1 9.8 16.215.2 0.5 4.4 2.0 20.4 5.3 129.7 0.3 0.3 0.3 818.6 5.5 560.4 10.1 37.1 33.4 37.4 billion).0 15.5 10.0 55.9 8.3 166.0 252. This represented an expansion in total loans of 44.6 45.1 45.0 0.3 0.5 5.5 8. Syndicated Loans Review.1 25.2 208.7 3.3 20.6 35. This increased from a global share of 40. increased 69. 39.2 1.8 35.7 119.5 22.1 45.4 0.2 6. with 32 deals valued at US$14.3 3.9 2.9 0.7 100. Full Year 2010.2 2.8 per cent.5 0.8 2.7 2.5 0.576.6 5.1 819.633.0 4.3 0.2 249.5 0.9 50.7 84. Australia’s four major banks all ranked within the top 20 mandated arrangers for the Asia Pacific in 2010.829.8 2.7 7.772. beginning with the privatisations of the late 1980s and 1990s that has resulted in extensive experience with private infrastructure financing and public-private partnerships (PPPs).1 190.7 108. each region saw an increase in deal activity: Americas increased 24.136.3 0.3 46.9 100.7 14.2 1.0 24.481.1 1.4 0. 26 > Australian Trade Commission .7 13.0 1.8 46.4 468.39 Infrastructure is one of the most significant areas for project financing and Australia is widely recognised as a global leader and innovator in infrastructure financing.4 3.4 0.1 1.4 7. Ibid.1 2.9 29.

Initiatives meet all of Infrastructure Australia’s criteria. The Australian infrastructure market is among the most sophisticated markets in the world with estimated A$9 billion in infrastructure construction projects work contracted annually.infrastructureaustralia. schools.522 10.infrastructureaustralia. ABARE-BRS. shipping ports. October 2010. Initiatives have strong strategic and economic merit. Options to address hindrances to the development and provision of efficient national infrastructure. The value of these projects totals almost A$83 billion. 40.au In addition to public sector infrastructure projects.0 billion in committed projects. Recommendations for policy and regulatory reforms to drive better efficiencies in the utilisation of national infrastructure networks. Federal Budget 2009-10 national infrastructure spending priorities June 2009. and a further 31 valued at A$27.8 billion in less advanced projects. The agency plays an advisory role to governments. airports. gas and electricity transmission and distribution. power generators. Australia’s Banking Industry > 27 . State Governments have committed an estimated A$2. Appendix G outlines the future capital expenditure commitments within Australia’s minerals and energy sectors.pdf Infrastructure Australia Infrastructure Australia (IA) was established in 2008 to coordinate a national approach to Australia’s future infrastructure needs. Australia is currently undergoing significant investment in private sector projects that will increase the output of Australia’s mineral and energy sectors. ‘Getting the fundamentals right for Australia’s infrastructure priorities’. education and health sectors as part of the ‘Building Australia Fund’. Real Potential Threshold Ready to proceed 41.au/publications/files/Report_to_COAG_ 2010. More information on Infrastructure Australia and its policies and guidelines is available at: www. Getting the Fundamentals Right for Australia’s Infrastructure Priorities.123 11. aged care facilities and public housing. Infrastructure Australia. In addition. railway rolling stock and terminals.40 Infrastructure needs and priorities for Australia are laid out by Infrastructure Australia. broadcast communications. investors and owners of infrastructure concerning: › › › › › Significant national infrastructure priorities and initiatives.566 Source: Infrastructure Australia. June 2010 http://www. there has been a considerable amount of analysis of potential solutions. 42.5 billion to infrastructure projects. energy. KPMG.634 Early Stage Initiatives address a nationally significant issue or problem. and Possible financing mechanisms. Infrastructure projects directly associated with the minerals and energy sector currently stand at 15. water utilities. rail projects and gas pipelines.42 Committed infrastructure projects include iron ore and coal ports. Appendix F provides an overview of priority projects as at June 2010. June 2010. but the identification or development of the right solution is at an early stage.41 Infrastructure Australia’s Investment Priorities Stage Definition Total Cost Estimates (A$ Million) 19. Initiatives clearly address a nationally significant issue or problem and.gov. Infrastructure needs of the Australian public. communications. 41. In the 2009-10 Budget. Minerals and energy Major development projects report. hospitals. the Australian Government committed A$22 billion to improve the nation’s infrastructure in transport.Australian expertise extends across the full spectrum of economic and social infrastructure including toll roads.gov. and are only not ready to proceed due to a small number of outstanding issues. with an estimated cost of A$11.

Monthly Trade Data Dec 2010.6 4.9 21.6 43. except Fuels Metalliferous Ores & Metal Scrap Mineral Fuels & Related Materials Coal.1 46.9% East Asia 54.3 33. Table 12a. Australian exports to Asia have grown more rapidly than other regions. Monthly Trade Data Dec 2010. Austrade Over the past ten years.4 9.4 23. Inedible.5 231 2010 % Share 32.1 25.0 23.0 71.1% Africa 1.3 23. Australia. Austrade Sources: Department of Foreign Affairs and Trade. Exports – 2010 (% Share) Middle East 2.5 7. Sources: Australian Bureau of Statistics Cat No.2 9.2 32.0 13.9 23.9 10.9 8.5 119 2004 23.5 10.7 5.5 1.0 International Trade in Goods and Services.4 47.2 34.9 66.7 12. Coke & Briquettes Petroleum & Related Materials Gas.8 10.5 40.2 118 2006 39.6 3. Australia exported A$231 billion in merchandise trade.8 18.3% Africa 1.0 10. Merchandise Exports.9% Oceania 4.6% Americas 14.9 13.3 7.1 110 TOTAL 1.2% Oceania 5. Four of Australia’s top five country export destinations are now based in Asia.1 12.3 10.8% South Asia 1.5 2.1 12.2 13.3% South Asia 7.9 164 2008 56.6 17.8 6. 5368.6 1. Commodities not classified elsewhere in the Standard International Trade Classification.7 21.6% Sources: Department of Foreign Affairs and Trade.Trade Finance Australia has an open.6 100 CAGR % 2000/2010 13. FOB Value (A$ Billion) 2000 Crude Materials.7 39.1 16.2 42.5 17.8 29. having grown at 7.3 10.7 13. The majority of Australia’s exports are natural resources and primary products and account for around 70 per cent of Australia’s total merchandise exports.7 222 2010  75.9 28. Australia’s Merchandise Exports. Table 3.9 24.2% Europe 9. Natural & Manufactured Manufactures Food & Beverage & Tobacco & Live Animals Other 1 2002 22. In 2010.8 11.5 3.2 37.9% Europe 20.8 13.7 24.4 23.6 68.2 24.0 9.3 50.1 11. diversified economy that is actively engaged in international trade and has increasingly exported goods and services to the fast growing Asian region. Table 4.1 3.6% Imports – 2010 (% Share) Middle East 2.4 19.7 per cent CAGR since the year 2000.2 16. Austrade 28 > Australian Trade Commission .1% East Asia 67.2 22.3 23. CAGR = Compound Annual Growth Rate.9% Americas 6.

6 3. Australia.0 2.6 20.4 2.1 10.8 18.4 0. with travel (including business and personal education-related services) contributing A$33.5 2.5 1.3 4.5 3.4 22.5 -1.2 5.5 1.5 12.4 9.6 2.6 3.6 231 2010 % Share 25.au/Pages/Preparingforexport.2 2.2 3.0 3.7 1.5 3.8 3.0 1.9 0.2 10.4 16.4 1.8 7.6 1.7 6.3 0. Table 14a.6 1. Export Finance & Insurance Corporation (EFIC) http://www.6 -0.8 119 2004 11.9 2.5 11.0 11.1 4.0 21.6 2. 5368.2 9.3 8.3 3.6 19.6 -1.9 24.3 million that supported export contracts and overseas investments of over A$5.8 2.2 8.aspx 44.1 4.1 1.4 2.6 2.efic.6 1.Australia’s Merchandise Exports by Country.9 1.4 2.4 billion.1 2.8 10.6 0.8 1.3 2.4 118 2006 20.0 3. Export Finance Navigator http://www.9 1.8 4.7 4. EFIC provided financing facilities totalling A$971.6 22.6 18.9 billion.1 0.3 1.3 1.3 18.4 3.9 1.5 4.3 1.0 5.4 1.2 8.3 1.0 5.4 9.7 222 2010  58.6 4.0 1.8 11.gov.8 0.1 5. or over 60 per cent of Australia’s services exports.6 3. FOB Value (A$ Billion) 2000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 China Japan South Korea India USA Taiwan UK New Zealand Thailand Singapore Indonesia Malaysia Hong Kong Netherland UAE Papua New Guinea Germany South Africa Saudi Arabia Brazil Other Markets TOTAL CAGR = Compound Annual Growth Rate.9 0.4 13.6 3.1 3.43 Export Finance Navigator for SMEs lists the following banks with specialist trade finance teams44 in Australia: › › › › › › › Australia and New Zealand Bank Bank of Queensland Bendigo Bank Commonwealth Bank of Australia HSBC National Australia Bank Westpac 43.9 2.3 2.0 International Trade in Goods and Services.5 7.gov.4 12.6 1.1 8.5 4.au/Pages/homepage.3 4.5 7.0 1.2 0.6 2.3 8.5 2.6 7. Austrade In addition to merchandise trade.9 8.8 0.9 4.3 2.5 5.1 2.3 43.9 2.6 3.7 5.8 9.3 50.4 -1.4 8.7 9.0 5.0 164 2008 32.0 22.3 9.6 27.3 9.1 2. The Australian Government also assists Australian businesses with trade finance solutions through the Export Finance & Insurance Corporation (EFIC).aspx Australia’s Banking Industry > 29 .8 7.0 1.7 0. In fiscal year 2010.2 2.8 100 CAGR % 2000/2010 25.4 20.3 3.5 1.0 1.4 3.0 1.1 8.0 0.4 32. 2002 8.8 6.9 4.1 6.3 6.8 1.1 8.2 2. Australia exported A$53 billion worth of services in the fiscal year 2009-10.6 1.exportfinance.3 8.8 4.5 4.3 5.9 7.5 110 Sources: Australian Bureau of Statistics Cat No.0 3.0 3.8 1.5 1.8 3.4 8.5 2.5 24.

3 3. their announced deals were worth around US$347 billion—accounting for more than 60 per cent of the region’s total.2 1.1 21.136.9 1.2 5. 45.5 527.2 33.5 per cent of global deal flow and more than one-fifth of that of the Asia-Pacific region.3 921.3 17.7 2007 Rank Market Value Share US$Bn % 4.5 36. up 22.8 29.8 2.8 104. Of the top ten financial advisors in Australia.2 12.1 2. the disruption experienced in international debt markets.3 4.570. DRPs. based on completed M&A by imputed fees.5 2.4 3.762.5 3.867.7 1. During the financial crisis in 2008-09.8 458. The total value of the Australian deals was the largest in the Asia-Pacific region.5 1.5 2.2 8. Australia has a vibrant Private Equity (PE) market.3 8.8 342.4 923. SPPs.7 5.3 Sources: Thomson Reuters Mergers & Acquisitions Financial Advisors.3 5.169.6 1.4 475.168. International and domestic PE leveraged buyouts continue to contribute significantly to M&A activities.6 162.4 1.4 89.7 269.0 46.7 33.9 1.2 77. Australian activity represents around 3.5 136.7 2009 Rank Market Value Share US$Bn % 1.890. Fourth Quarter 2008 and Fourth Quarter 2007.475. On a five-year total basis.0 46. raising A$17 billion over the five years to June 2010. financial.6 2.0 3. Total equity market raisings46 increased by 7.4 100.2 640. The largest PE deal for 2010 was the A$2. calls on contributing shares.8 40.4 54. accounting for 43 per cent of Australia’s M&A advisory fees.0 40.3 37.9 1.3 14.980.1 billion.8 5.1 2006 Rank Market Value Share US$Bn % 3.0 197.2 99.Corporate Finance and Advisory Mergers and Acquisitions Mergers and Acquisitions (M&A) activity improved in 2010 as the world economy recovered from the global financial crisis.0 100. Australia’s equity capital market provided support for corporations seeking capital off-setting.9 100. Fourth Quarter 2009. Full Year 2010.4 3.5 per cent during this period with secondary market raisings rising 74 per cent from A$50.7 503.4 75.2 35.3 821.1 596.5 36. energy and telecommunications sectors.510. according to the Thomson Reuters’ Full Year 2010 M&A Financial Advisory Review.4 1.9 131.4 65.7 23.0 113.1 1.6 641.9 0.3 46.3 3. placements.9 4. The rebound in Australia’s M&A activity last year was largely driven by the mining.8 2006-2010 Rank Market Value Share US$Bn % 15. exercise of options.6 342.561.5 101.1 32.6 387. Includes Rights Issues.312. 46.8 2.4 5.7 9.2 90.2 2.156. 30 > Australian Trade Commission .5 36.9 108. employee share schemes.0 512.1 1.4 95.3 4.1 4. Australian M&A activity has been significant with announced deals totalling US$528 billion.0 45.0 1. in part.1 85. nine are foreign-based global investment houses and one is the Australia-based Macquarie Group. The value of global-announced M&A totalled US$2.0 162.7 17.7 63. Many companies raised equity through rights issues and placements to strengthen their balance sheets and meet the short fall from debt markets at this time.3 4.0 45. Healthscope.7 38.8 46.8 93.8 4.0 428.325. 19th July 2010.7 billion45 buyout of Australia’s second largest private hospital owner and pathology provider.5 9.0 3.3 3.7 83. In the Asia-Pacific region M&A activity is heavily concentrated in the top three economies (Australia.6 104.5 2008 Rank Market Value Share US$Bn % 2. They together generated US$648 million in imputed fees in 2010.9 581.4 trillion in 2010.1 26. China and Japan).308. Austrade Equity Capital Markets Australia has a large and liquid equities market.9 565.434. a 140 per cent increase from 2009.7 3. Enterprise Value at time of announced deal.5 114.0 48.592.3 1.8 5.8 1.0 160. Australia’s M&A announced value reached US$132 billion in 2010. Together.2 333.7 719.080.6 136. Worldwide Announced Mergers & Acquisitions – Financial Advisors 2010 Rank Market Value Share US$Bn % Worldwide Americas USA Brazil Canada Europe UK Asia-Pacific Australia Japan China Africa/Middle East 2.0 40.6 6.609.9 per cent from 2009.2 9.3 1.6 billion to A$88.3 6.7 100.7 3.9 131.3 3.1 91.3 100.6 49.2 2.7 3.2 3.5 100.887.7 49.

883 23. Sources: AFMA Australian Financial Markets Report.459 5.146 51.753 14.148 billion.4 5.400 1.748 6. Size of Key Stock Markets in the Asia-Pacific Region Market Capitalisation of Floating Captals (US$ Billion.613 5. SPP.544 7.487 11.468 13.856 2.9 Other1 6.587 549 992 2.896 12.271 21. Austrade With 2.242 2.742 17.3 7.920 38. Prospectus. Austrade Australia’s Banking Industry > 31 .117 23.310 7. Dividend Reinvestment.148 USA Japan UK Canada France Germany 718 638 14.753 3.446 8.449 28.869 25.108 19.041 16.506 23.817 19.235 23.758 7.New Capital Raisings for Cash in Australia (A$ Million) Survey Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR % Primary Raisings IPOs Privatisations 6.519 2.160 999 1.001 12.905 61.6 % of Average Market Capitalisation 5.961 12.000 US$ Billion 806 800 600 472 446 400 245 200 125 110 84 38 0 20 Australia China South Korea Taiwan Hong Kong India Singapore Malaysia Indonesia Thailand Philippines New Zealand Sources: Standard & Poor’s.633 37.0 4.6 4.509 16. the Australian stock market is the second largest free-floating stock market in Asia-Pacific after Japan at US$1.1 9. Other includes Calls on Contributing Shares.857 5.6 – 1.939 8.187 2.7 2.706 6.6 9.789 20.578 1.400 200 0 0 0 0 8.0 Total 36.024 4. Employee Share Schemes.643 89. Exercise of Options.964 76. Global Broad Market Index.200 1.032 7.118 9.182 17.003 1.072 listed companies.5 5.679 0 0 0 – Secondary Raisings Rights Issues Placements 4.434 77.1 4.7 5.9 3.785 11.293 5.608 9. 31 Dec 2010) 1.885 11.675 1.338 18.640 7.2 3.125 13.047 38. Dec 2010.694 11.

2 214.6 56. Equity Capital Markets Review. Including Intial Public Offerings.5 1.1 268.0 37.1 228.0 100. Austrade All ten of the world’s largest arrangers operates in the Australian equity capital markets.0 249.179 2.6 4. A large portion of equity is raised in the secondary market through rights issues (or entitlement offers) and institutional placements.5 6.4 36.4 80.8 37.5 17.1 billion equity was raised with estimated imputed fees of A$756 million.0 7. Middle East & Africa in 2007 include Rights Offers that are not included in other regional sub-totals or the Global total.5 3.0 7.643 32.366 3.9 5.893.4 6.5 238.5 3. Commentators expect primary issuance to increase as the market outlook improves. 2. Full Year 2010.1 per cent of the global equity raisings of US$3.8 19.8 3.3 19.3 37.4 3.154 2. Equity Capital Markets Review.0 34.4 755. The regional total for Europe.9 6.8 100.6 854.0 35.077 25.0 Sources: Thomson Reuters. Sources: Thomson Reuters Global Equity Capital Markets.7 19. A$29.0 63.694 1. Over the five years. Thomson Reuters.5 2.7 6.Corporate advisory services are provided by way of arranging and underwriting new equity securities for domestically domiciled corporations from the private and public sectors.2 6.5 27.1 9.144 1.4 173. Fourth Quarter 2009. Austrade 47.8 719.7 165.1 42.1 345.6 3.4 1.2 5.3 4.5 25.2 49.9 31.9 trillion.6 23.9 30.5 3.8 42.4 5.2 19.9 31.3 29. Global Equity Capital Markets – Equity and Equity-Related1 2010 2009 2008 2007 2006 2006-2010 Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % USA Europe.6 7.5 30.9 141.4 6.393 2.8 3.237.0 12. Fourth Quarter 2008 and Fourth Quarter 2007.4 815.9 6.1 22. Australian Equity Capital Markets.8 79.056 26.6 (ex Japan & Australia) Japan Australia Latin America Global Total 2 58.2 852.5 3.094 1. Full Year 2010.9 5.7 231.7 9.5 6.1 24.1 199. representing 5.9 68.2 1.8 2. Full Year 2010.8 227.7 5.1 27. Australia’s equity capital market raised almost US$200 billion.7 49.5 872.1 28.1 40.0 15.7 64.2 631.1 51. Middle East & Africa2 200. Secondary Offerings and Convertible Offerings.3 58. Over the past three years.5 482.0 Imputed Fees (A$Mn) Manager Market Fees Share (%) 144.2 159.123.1 4.5 4.9 179. 32 > Australian Trade Commission .5 Asia Pacific 306.7 28.5 21.8 46.4 3.47 Australian Equity Capital Markets Jan 1 2010 – Dec 31 2010 Bookrunner UBS Bank of America Merrill Lynch Credit Suisse RBS JP Morgan Goldman Sachs & Co Macquarie Group Morgan Stanley Citi Deutsche Bank AG Top Ten Total Industry Total 2010 Rank 1 2 3 4 5 6 7 8 9 10 Proceeds per Bookrunner (A$Mn) Market Proceeds Share (%) 8.1 208.8 19.5 28.088 2.8 21.455 1.4 6.8 6.1 4. secondary market issuance far exceeded primary market issuance as listed companies recapitalised and paid down debt. In 2010.6 2.7 34.

and improving liquidity and access to capital for companies”.457 1. gov. the Government granted a licence to Chi-X Australia Pty Ltd as an alternative securities exchange.3 billion51 issued through offshore markets – namely the US.500 1. Includes public domestic non-government bonds (including Kangaroo bonds).49 Debt Capital Markets Debt capital markets include the issuance of bonds by Australian governments and non-government institutions.500 531 126 1049 845 30 655 26 5 225 8 201 50 117 51 115 23 106 1. INSTO League Tables as at 10 January 2011. See the AOFM Annual Report http://www. ASIC ’11-87MR ASIC publishes final competition market integrity rules’ 29 April 2011 http://144.gov. semi-government bonds and asset backed securities. International and Domestic Debt Securities – Amount Outstanding Residence of Issuer (US$ Billion.140. 48.treasury. non-government debt outstanding more than tripled from around A$400 billion to A$1. leveraging our pool of national superannuation savings. Australian governments and business issue in both domestic and international markets. These rules are expected to begin on 31 October 2011. aspx?doc=pressreleases/2011/067.192 1.4 billion in the year to June 2010. Australian Government Treasury ‘Government approves new financial markets competitor’ 4 May 2011 http://ministers.001 592 500 0 205 37 58 9 32 China Australia South Korea India Malaysia Taiwan Thailand Hong Kong Singapore Indonesia Philippines New Zealand Sources: Bank for International Settlements. ASIC published new market integrity rules to provide the framework for the introduction of competition in equity exchange markets.000 2. lowering transaction costs for market participants.au/DisplayDocs.The Government is progressing towards the introduction of competition to exchange markets in Australia. the Treasurer and Assistant Treasurer said “Competition in Australia’s financial markets is critical to promoting exchange innovation. Domestic debt market issuance totalled A$116. On 1 August 2010.aofm.901 1.4 trillion debt securities outstanding – the region’s third largest amount after Japan and China. Australia has US$1.411 3. Non-government debt securities were more than four times the government debt securities outstanding with the local financial institutions being the largest issuers in these markets.3 trillion.au/content/publications/reports/AnnualReports/2009-2010/download/AOFM_Annual_Report_2009-10. Europe and Japan. June 2010) 3.gov.850 2.000 1. Austrade Over the decade to June 2010.htm&pageID=003&min=brs&Year=&DocType 50.081 12.500 US$ Billion 2. Source.000 USA Japan UK France Germany Italy Canada 25.500 Domestic Securities 24 2843 International Securities 3.nsf/ byheadline/11-87MR+ASIC+publishes+final+competition+market+integrity+rules?openDocument 49.pdf 51. In a joint media release. Australia’s Banking Industry > 33 . Australian and New Zealand entities. Dec 2010. Australian Securities and Investment Commission ‘10-151MR ASIC ready for market supervision’ http://www. asset-backed securities and Kangaroo bonds (bonds issued in Australian dollars by non-residents). Tables 11 and 16A.694 1.nsf/byheadline/10-151MR+ASIC+rea dy+for+market+supervision?openDocument.6 billion50 in 2010 with A$70.asic.138/asic/asic.336 6. Quarterly Review.550 2.au/asic/asic.177 168 3. market supervision for local exchanges transferred to the Australian Securities and Investment Commission (ASIC) and in April 2011. Does not include The Commonwealth Government of Australia’s bonds that had gross bond issuance of A$58.48 On 4 May 2011.79.

the bulk of which were issued by financial institutions (106 deals valued at A$69. 34 > Australian Trade Commission .785 116.6 billion.100 21. Includes A$36. Austrade In 2010. This figure also includes 76 Kangaroo bond issues (foreign entity bonds issued through the domestic market in Australian dollars) valued at A$36.Australia’s Debt Securities Outstanding (Fiscal year ending June.600 1.000 800 600 400 200 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sources: Reserve Bank of Australia.400 1. Source: INSTO League Tables as at 10 January 2011 A$m 81.800 1.550 Deals 149 10 35 194 Bonds issued onshore totalled A$417 billion at June 2010. of which A$294 billion was issued by locally domiciled entities and A$124 billion issued by non-resident issuers (Kangaroo bonds). A$ Billion) 1. Public Domestic Bond Issuances including self-led deals 01/01/2010 – 31/12/2010 Bookrunner Public Domestic non-government¹ Semi-government bonds Public Domestic ABS TOTAL 1.1 billion Kangaroo bonds.1 billion. By far the majority of these issues were in public domestic non-government bonds.6 billion). Australia’s financial institutions are the largest issuers of bonds in the local market. public domestic bond issuances (including self-led deals) in Australia totalled 194 deals valued at A$116.200 A$ Billion Non-Government Short Term Non-Government Long Term Non-Government Overseas Government 1. Statistical Table D4 (data downloaded 30 Sep 2010).665 13.

663 10. 1 year minimum. Sources: Reserve Bank of Australia. Pricing must be disclosed.8 Non-Residents (Kangaroo Bonds) 9 18 21 20 34 48 81 103 110 103 124 29. Austrade Australia’s major banks were the largest arrangers in 2010 with many foreign banks providing competition in the market.7 30.3 Non-financial corporations 17 23 28 32 33 39 42 48 45 41 41 9.9 Assetbacked 24 30 42 52 64 79 99 122 112 99 81 19. Long-term non-government securities issued in Australia. Public Domestic Non-Government Bonds1 including self-led deals 01/01/2010 – 31/12/2010 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Bookrunner ANZ National Australia Bank Westpac Institutional Bank Commonwealth Bank of Australia UBS RBC Capital Markets TD Securities JPMorgan HSBC Royal Bank of Scotland Deutsche Bank Credit Suisse BNP Paribas Macquarie Group BMO Capital Markets Merrill Lynch Barclays Nomura Nikko SSB RaboBank TOTAL A$m 14. Source: INSTO Leagues Table.5 1.665 Deals2 53 21 36 35 34 40 34 10 5 12 13 5 5 3 2 1 1 2 1 1 149 1. A$50 million minimum.017 629 350 300 300 238 225 50 81.0 19.Australia’s Corporate Bonds Outstanding Issued Onshore1 Banks and Other Financial Corporations 19 24 27 28 35 48 64 78 99 135 172 41. as at 10 January 2011 Australia’s Banking Industry > 35 . Excludes ASX listed corporate bonds. Statistical Table D4 Debt Securities Outstanding.546 2.971 2. 2. All increases eligible. Bookrunners given equal allocation.1 A$ Billion Jun-2000 Jun-2001 Jun-2002 Jun-2003 Jun-2004 Jun-2005 Jun-2006 Jun-2007 Jun-2008 Jun-2009 Jun-2010 Share % CAGR % since 2000 Total 70 95 117 132 166 214 286 352 366 378 417 100.1 24.933 2.106 9.488 5.963 2.896 7.392 1.871 10.058 1.5 12.669 7.7 8.

The measures also allow vanilla bonds to be offered under a two-part prospectus.9 billion in 2008 to A$14. ‘Australia as a Financial Centre’ Report http://www. It will also facilitate the trading of Commonwealth Government Securities on a securities exchange in Australia.au/banking/content/_downloads/competitive_and_sustainable_ banking. See Australian Government ‘Competitive and Sustainable Banking System’ report http://www. this market was dramatically affected by the credit crisis.A recent Government review.53 The initiatives simplify the disclosure requirements for certain offers of listed vanilla bonds by allowing such offers to be made with reduced disclosure under a short-form prospectus. including reducing red tape associated with issuing corporate bonds to retail investors. within certain parameters. Worldwide. and other asset-backed securities (ABS). as part of its broader agenda to foster a deep and liquid corporate bond market. 52.54 Asset-backed Securities Australia’s asset-backed securities market has operated for over twenty years and has provided funding for Australian commercial and residential mortgages. then a more diversified and liquid bond market should be part of that vision. streamlining disclosure requirements and prospectus liability regulations. Annual 60 Onshore 50 Offshore Purchases by the AOFM 40 A$ Billion 30 20 10 0 2000 2001 2002 2003 2004 2005 Year 2006 2007 2008 2009 2010 Sources: The Reserve Bank of Australia.gov. The largest component of this market has been residential mortgage backed securities (RMBS) which represents around 77 per cent of Australian ABS on issue.52 found that “if Australia is to develop as a leading financial centre that provides liquid and efficient financial services across a broad range of products and asset classes. credit cards. comprising a base prospectus (which may be used for a number of different offers) and a second part prospectus (which will relate to a particular offer). Austrade Commercial banks (both domestic and foreign) are the main arrangers in the local market. auto and equipment leases.au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia. Australian RMBS Issuance $A Equivalent.” In May 2010.nsf/byheadline/MR10-98+Pr ospectus+relief+to+help+corporate+bond+market?openDocument 54.aspx 53. Australian Securities and Investment Commission ‘MR10-98 Prospectus relief to help corporate bond market’ http://www. In December 2010.treasury. to issue bonds to retail investors using a simplified process.gov. Australia as a Financial Centre (November 2009). ‘The State of Play in the Securitisation Market’.pdf 36 > Australian Trade Commission .pdf.1 billion and A$19.asic.au/asic/asic. 30 November 2010.austrade. Recent RMBS issuance in Australia has increased from a low of A$9. the Government announced further reforms. the Government announced that the Australian Securities and Investment Commission (ASIC) would introduce a class order relief permitting listed entities.5 billion in 2009 and 2010 respectively.gov.

Public Domestic Asset-Backed Securities including self-led deals 01/01/2010 – 31/12/2010

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13

Bookrunner Westpac Deutsche Bank Macquarie National Australia Bank ANZ Commonwealth Bank of Australia Royal Bank of Scotland JPMorgan Credit Suisse Suncorp Metway Barclays Bank of Scotland Lloyds TSB

A$m 4,788 3,553 3,368 3,231 1,855 1,421 1,181 662 636 533 217 204 136

Deals 15 12 9 13 9 6 4 3 4 1 2 1 1

Source: INSTO Australian League Tables, as at 13 January 2011

Securitisation remains an important funding source for non-bank lenders, regional banks, building societies and credit unions. The Australian Government continues to offer support to this market through the Australian Office of Financial Management’s (AOFM’s) active buying program of high quality AAA-rated RMBS. In December 2010, the Federal Treasurer announced an additional A$4 billion commitment to the AOFM’s purchasing program, taking the total AOFM program to A$20 billion. Since 2008 the AOFM has purchased 74 tranches in 46 RMBS deals totalling A$12.8 billion. As part of the Federal Government’s Banking Reforms announced in December 2010, the Treasury will accelerate work on designing structures for the issuance of bullet RMBS. In late 2010, two Australian issuers – BankWest and Bendigo Adelaide Bank – issued tranches with bullet features. More recently, the Commonwealth Bank of Australia issued a A$3 billion RMBS deal with a soft bullet tranch worth A$525 million. Bullet structures may increase the investor universe to include those who require non-amortising principal repayments. Bullet RMBS could be eligible for inclusion in certain bond market indices – opening the market to institutional investors restricted to the securities listed in these indices. Further details on Australia’s Residential Mortgage Backed Securities Market can be found at Austrade’s January 2011 publication ‘Securitisation. Australian Residential Mortgage Backed Securities’ available at http://www.austrade.gov.au/ ArticleDocuments/2792/Data-Alert-110124-RMBS.pdf.aspx

Kangaroo bonds Kangaroo bonds are corporate, semi-government or supranational bonds issued by non-resident entities through A$ markets. The Kangaroo bond market is the fastest growing sector of Australia’s domestic bond market, having increased considerably since the late 1990s with many non-resident corporations issuing bonds into the market during the decade commencing 2000. Over the ten years to October 2010, Kangaroo bonds outstanding have increased from A$9 billion to almost A$130 billion, a CAGR of 27.7 per cent.

Australia’s Banking Industry

> 37

Kangaroo Bonds1
140

120
Bonds Outstanding A$ Million

100

80

60

40 20

2008

2002

2003

2004

2005

2000

2006

2008

2002

2003

2004

2005

2000

2006

2001

1993

1994

1995

1996

1998

1999

2007

2009

2001

1993

1994

1995

1996

1998

1999

1997

2007

2009

1992

1. Long-Term Non-Government Securities Issued in Australia – Non-Residents. Sources: Reserve Bank of Australia, Statistical Table D4 Debt Securities Outstanding

The attractiveness of the market is intrinsically tied to the development of Australia’s foreign currency swap market. The development of Australia’s swap market provides competitive pricing for foreign firms to swap currency exposures back into their local currencies. In 2010, a total of A$36.1 billion was issued across 76 transactions. Arrangers included the Australian operations of foreign banks and Australia’s major banks. Public Domestic Kangaroo Bonds1 including self-led deals 01/01/2010 – 31/12/2010
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Bookrunner RBC Capital Markets TD Securities UBS Australia and New Zealand Bank Commonwealth Bank of Australia HSBC Westpac Institutional Bank JPMorgan Deutsch Bank Royal Bank of Scotland National Australia Bank BMO Capital Markets Credit Suisse Merrill Lynch Nomura Nikko SSB BNP Paribas RaboBank TOTAL
1. A$50 million minimum, 1 year minimum. Pricing must be disclosed. All increases eligible. 2. Bookrunners given equal allocation. Source: INSTO Australian Financial Markets League Tables

1997

A$m 6,572 5,963 4,558 4,083 3,196 2,433 2,317 2,117 1,942 775 567 350 325 300 238 225 100 50 36,110

Deals2 37 34 24 21 16 4 11 7 11 4 3 2 2 1 2 1 1 1 76

38 > Australian Trade Commission

2010

0

Many Kangaroo bonds have high credit ratings and, as they can be eligible collateral for use by ADIs in repurchase agreements with the RBA, provide extra liquidity to holders of these bonds. The local investors for these bonds include domestic and foreign banks and local fixed-interest fund managers. Non-resident issuers benefit from an alternative funding source in a developed market with strong common law, a developed derivatives market and a fast growing pension funds industry. Austrade’s publication ‘Investment Management Industry in Australia’ highlighted that Australia’s asset allocation to fixed income investments has been maintained at 12-15 per cent over recent years. With superannuation funds projected to continue to grow strongly over the coming decades, the appetite for quality bond issuance in the Australian market place is expected to continue.

Over-the-counter and exchange-traded markets
The 2010 Australian Financial Markets Report, released by the Australian Financial Markets Association (AFMA), shows that Australia’s annual turnover of over-the-counter and exchanged-traded markets have exceeded A$100 trillion. Aggregate Australian financial markets (over-the-counter (OTC) and exchange-traded) turnover rose 5.4 per cent to almost A$102 trillion in 2009-10, reversing the global financial crisis induced decline (16.3 per cent) of the previous year. The total market turnover in 2009-10 was more than two and half times that of ten years ago, reinforcing the growth in depth and sophistication of Australia’s financial markets. Australia Financial Markets Annual Turnover

Financial Year Ending June OTC Markets Foreign Exchange Other Exchange Traded Markets Equities Futures All Financial Markets

(A$ Trillion) 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 27.4 15.9 11.4 10.8 0.5 10.3 38.1 30.3 18.2 12.1 11.7 0.6 11.2 42.0 37.9 21.8 16.1 12.2 0.7 11.5 50.2 42.5 26.4 16.2 13.8 0.7 13.1 56.4 53.3 34.1 19.2 17.8 0.9 16.9 71.1 51.7 33.6 18.1 24.1 1.2 22.9 75.7 60.5 41.6 18.9 29.5 1.4 28.0 89.9 70.9 46.9 23.9 39.0 1.8 37.2 109.8 73.0 46.7 26.3 42.3 2.2 40.1 115.3 69.9 44.3 25.6 26.6 1.5 25.1 96.5 66.7 40.3 26.4 35.0 1.9 33.2 101.7

CAGR % since 2000 9.3 9.7 8.7 12.5 14.8 12.4 10.3

% Change on a Year Ago OTC Markets Foreign Exchange Other Exchange Traded Markets Equities Futures All Financial Markets -2.1 -16.7 29.6 2.1 24.9 1.3 -0.9 10.6 14.0 5.7 8.7 18.0 8.2 10.0 25.3 19.9 33.5 4.5 29.5 3.3 19.5 12.2 20.9 0.4 13.0 4.8 13.5 12.4 25.3 29.2 18.9 28.9 17.7 29.5 26.2 -3.1 -1.4 -6.1 35.1 32.1 35.2 6.5 17.0 23.9 4.4 22.5 24.7 22.4 18.8 17.2 12.8 26.9 32.2 24.9 32.6 22.1 3.0 -0.5 10.0 8.6 21.2 7.9 5.0 -4.3 -5.1 -2.7 -37.1 -31.8 -37.3 -16.3

Market Share % 2009-10 -4.6 -9.1 3.1 31.6 24.2 32.0 5.4 65.6 39.6 26.0 34.4 1.8 32.6 100.0

CAGR = Compound Annual Growth Rate. Sources: 2010 Australian Financial Markets Report and various previous year reports; Austrade

Australia’s Banking Industry

> 39

gov. Singapore and Hong Kong. For foreign banks. http://www. The Reserve Bank of Australia announced in May 2010 that the Payments System Board is undertaking a strategic review of innovation in the Australian payments system. policies. supporting operations for the Asia-Pacific region.rba. BankWest. Maitland Mutual Building Society. Members Equity. Arrangements for clearing most payment instruments – cheques. The objective is to identify areas in which innovation in the Australian payments system may be improved through more effective co-operation between stakeholders and regulators. there is a mix of models. and standards governing payments clearing and settlement within Australia. ANZ Bank. Scheme credit and debit cards (MasterCard and Visa) and BPAY are cleared independently of APCA. Singapore and India. National Australia Bank. has back office operations in Melbourne. The following table provides an overview of relevant operations functions and products for these firms.au/payments-system/about. The sophistication and competitive nature of Australia’s payments system is reflected in the changing nature of access points to the system. Operations Processing Outsourcing and offshoring of mid and back office activities undertaken by commercial banks and capital market participants is a key strategy aimed at reducing costs and improving efficiencies. 40 > Australian Trade Commission . EFTPOS and high-value payments – are coordinated by APCA. with some evidence of offshoring to London. EFTPOS – Electronic Funds Transfer at Point of Sale. member institutions comprised Adelaide Bank. http://www. Payment occurs through hand held terminals at the point of sale through a debit to a customer’s savings or cheque account with corresponding credit to the merchants’ account. IMB Ltd. A 2008 survey of operations heads for 45 commercial banks found that almost 20 per cent of 3. Bangalore. B&E Ltd. procedures. Cash remains the most important payment instrument for small retail transactions and accounts for the highest volume of transactions.gov. Operations currently being carried out in Australia vary by company. Survey of members of the AFMA Operations committee. In June 2010. St. Bendigo Bank. HSBC Bank Australia. Fiji. Heritage Building Society. Through the Payment Systems (Regulation) Act 1998 and the Payment Systems and Netting Act 1998.xls 56. equivalent to 20 per cent of GDP. ‘Bank@Post’ (formerly giroPost) provides a limited range of financial services at certain Australia Post offices on behalf of member financial institutions. for example. RBA website. RAMS Home Loans. The Australian Payments Clearing Association (APCA) is the Australian payments industry’s principal self-regulatory body. Access to the payments system comes from bank and non-bank (credit union and building society) branches. Citibank. including supporting their Australian and New Zealand operations from Australia.rba. 2008. Further details are available at the RBA’s website: http://www.58 The large Australian domestic banks undertake the bulk of their operations functions in Australia.html 58. Commonwealth Bank. Bank of Queensland.au/media-releases/2010/mr-10-14.html Appendix H outlines further details on Australia’s Payment and Settlement Systems. It is the primary vehicle for payments industry collaboration with a mandate to manage and develop regulations. and using Australia as a global service centre within a ‘follow-the-sun’ operations model. Wide Bay Australia Ltd and 56 credit unions.rba.55 ATMs and EFTPOS56 terminals. 55. and has recently announced a new centre in Manila. Non-cash payments account for most of the value of payments in the Australian economy. ING Direct. George Bank. It is estimated that approximately A$220 billion57 of non-cash payments are made each business day. Bank@Post. 57. reflecting a range of global and national strategies.Transaction Services – Payments System The Payments System Board (PSB) of the Reserve Bank of Australia (RBA) oversees the payments system and is responsible for promoting the safety and efficiency of the payments system. Wellington. the Reserve Bank has a clear mandate to oversee the operation of the payments system. ATMs.au/statistics/tables/xls/c08hist.gov. direct entry payments. GE Capital Finance Australia.500 operations staff in Australia support activities outside Australia and New Zealand.

Operations Functions and Products Operations Functions Staff supporting financial markets product processing Operational Risk Market Risk Credit Risk Nostro Reconciliations & Investigations Accounting Back Office Service Provider Custodial Services Trade Finance Processing Equity Clearing Services Future Clearing Services Stock Broking Other Margin Lending Source: Invest Australia & AFOA. treasury. which ranks favourably across the region and other major financial centres. “ AFOA Member Survey: Summary Report”. Australia’s Banking Industry > 41 . structured transactions. electricity and carbon trading. Operations Products Money Market Debt Foreign Exchange/OTC Derivatives Futures OTC Interest Rate Derivatives Energy Equities OTC Credit Derivatives Precious & Base Metals OTC Equity Derivatives Managed Funds Agricultural Commodities Real property Australia is viewed as being best suited for operations related to more complex financial products. The skilled workforce is seen as Australia’s greatest strength. non-automated confirmations. risk management and process renewal and engineering. corporate actions. over-thecounter transactions. Key criteria in selecting a location to establish or expand financial service operations include cost of labour. Australia has a very highly skilled. as well as access to a proficient. multilingual workforce. gold. such as equities and derivatives. availability of skilled labour with suitable financial services skills. September 2006. English speaking and multi-lingual work force.

For New York City.59 In addition. data represents 2008-09 academic year. Switzerland. Hours Worked. Education Factsheet 2009 Complementing the Australian university educated population is vocational and professional training that is focused specifically on financial service operations. http://www. TAFE NSW is Australia’s leading vocational education and training provider and operates through 10 institutions and 130 campuses across the State of New South Wales. Hong Kong in Figures 2010 Edition. Statistical Annex.55. State of New York and U.114 1.979 90 4. data represents 2008 full-time enrolment.1 1. The Mayor’s Economic Development Strategy for London. 3101.60 59. Switzerland and Harvard University. Second Quarter 2009 Table 1. Labour Market.0 426 5. Sources: AUSTRALIA: Australian Bureau of Statistics (ABS). Bureau of Labour Statistics. Australian Demographic Statistics. Population Estimates June 2010. Global Competitiveness Report 2009-10 (133 economies). Quarterly Census of Employment and Wages.364 3.0.5 179 4. Employment and Workplace Relations. Austrade Australia’s major financial centres – Sydney and Melbourne – also have comparatively high proportions of their populations with tertiary education and employed in financial services. ABS cat.3 London 7. Human Development Report 2009 (182 economies). Labour Force. HONG KONG: Census and Statistics Department.906 158 5. no. HESA Fact sheets. Status of the Civilian Labour Force.052 3. MOM Research and Statistics Department.com. Statistical Bulletin. For Singapore. cat. no. Table 1: London Higher. U.html 42 > Australian Trade Commission .0. Table H. Table 27: Incorporated Places over 100.6 New York City 8. Industry. February 2010.au/howex/servlet/Course?Command=GetCourse&CourseNo=11343 60.0 102 1.Workforce Skill Base Comparisons Australia World Competitiveness Yearbook 2010 Rankinga in: Attracting and Retaining University Education Labour Productivity (PPP) Management Education Global Competitiveness Report 2009-10 Rankingb in: Secondary Enrolment Rate Reliance on Professional Management Quality of Scientific Research Institutions Tertiary Enrolment Rate UNDP’s Human Development Report 2009 Rankingc in: Human Development Index (HDI) 2 92 134 24 10 23 13 21 1 7 10 13 89 46 35 80 107 30 25 100 73 38 34 66 24 19 15 32 17 8 12 29 43 11 2 6 36 13 4 30 3 7 9 18 16 49 55 46 8 22 58 13 23 23 22 27 13 36 25 40 2 1 21 2 10 10 3 8 39 28 14 29 China India Hong Kong Japan Singapore USA UK Sources: (a) Institute for Management Development (IMD).7 446 5. Education Bureau. Dec 2009. 6291.996 2.5 Hong Kong 7.988 3. Mayor of London. For example. http://www. (b) World Economic Forum.754 4.504 210 6. SINGAPORE: Ministry of Manpower (MOM).55. USA: US Census Bureau. no.5 Sydney 4.003 E03_aug 94 – Employed Persons by Sex. State-wide public and private institution students (studying in Australia) data was used for Sydney (New South Wales) and Melbourne (Victoria). Capital City-Balance of State. Statistics Singapore Ministry of Education. London Development Agency.504 2. mid-2008 is used. (c) The United Nations Development Programme (UNDP). 58 economies). the Australian Financial Markets Association offers a range of professional training courses leading to a financial services operations designation. Population Division. UK: Office of National Statistics (ONS). Selected Demographic Comparisons1 – Mid Year 2009 (’000) Population Labour Force Employed Persons – All Industries Finance and Insurance % of Total Employed Persons Universities – Total Enrolled Students % of Total Population Melbourne 3. the closest available figure for population. Department of Labour.994 3.000 or more Inhabitants in 2008 population.030 2.004 3.edu. IMD World Competitiveness Online 1995-2010 (Updated: May 2010.au/learning/qualifications/opsaccred. ABS cat. TAFE NSW (Technical and Further Education commission) recently launched a training certificate in financial services focused specifically on back office operations.5 Singapore 4. Department of Education.001 Labour Force.609 315 8.379 2. 6291. Bureau of Labour Statistics.4 251 5.tafensw.S.S.1.afma. Austrade. Student numbers in London 2008-09. online Statistics.0. ONS Time series Labour Market Statistics 18A Regional Labour Market Summary (data downloaded 28 June 2010). The latest data available for students is from 2008.223 142 6.695 3.4 53 1. For London and Hong Kong.676 332 9.

Australia’s Banking Industry > 43 .

Specifically: › › › (a) Australian Prudential Regulation Authority (APRA) is responsible for prudential regulation and supervision of ADIs (including Australian incorporated banks. APRA also acts as the national statistical agency for the Australian financial sector and plays a role in preserving the integrity of Australia’s retirement incomes policy. operating on functional lines. APRA and ASIC). building societies and credit unions). However. (b) Australian Securities and Investment Commission (ASIC) is the corporate. markets and financial services regulator. The broad framework for the regulation of the financial sector is determined by the Australian Government. Regulation of the financial system Overview Australia’s financial regulation framework is based on three separate agencies. the Australian branches of foreign banks. These regulatory bodies have prime responsibility for maintaining the safety and soundness of financial institutions. with a mandate which extends across the entire economy. Australian Prudential Regulation Authority APRA is the key prudential regulator for the Australian financial system. that critical warning signs are identified early and that our supervisory response is prompt and measured. and promoting systemic stability through implementing and administering the regulatory regimes that apply to the financial sector. In addition. APRA’s risk-based approach is underpinned by supervisory tools developed within the authority to ensure that risks are assessed rigorously and consistently. with the involvement of the Federal Treasury and the Council of Financial Regulators (whose membership consists of high-level representatives of the RBA. including the power to revoke a supervised entity’s authorisation if it fails to meet statutory requirements or prudential standards. APRA’s core mission is to establish and enforce prudential standards and practices designed to ensure that.Regulation and Tax Environment This section provides an overview of the regulation of banks and other financial institutions in Australia and summarises the key considerations that are most relevant to a foreign financial institution considering the establishment of an Australian operation (Australia’s taxation laws are separately considered in the section entitled ‘Taxation’). under all reasonable circumstances. as well as life and general insurance companies (including reinsurers and friendly societies) and most participants in the superannuation (retirement savings) industry. Federal Treasury. responsible for market conduct and investor protection. and (c) The Reserve Bank of Australia (RBA) is responsible for monetary policy. overseeing financial system stability and oversight of the payments system. to conduct on-site examinations of supervised entities and to require third-party audits. Responsibility for the day-to-day supervision of financial institutions and markets lies with these individual regulatory bodies. and 44 > Australian Trade Commission . (b) powers to make. protecting consumers. (c) powers to collect information. a full discussion of all relevant considerations is beyond the scope of this publication and it is necessary to seek independent legal advice in all cases. APRA is provided with strong statutory powers to regulate and intervene in the operations of financial institutions. including: › › › (a) authorisation or licensing powers. financial promises made by the institutions APRA supervises are met within a stable. Further details of the key regulators are set out below. efficient and competitive financial system. including the financial services sector. apply and enforce prudential standards. the Australia Competition and Consumer Commission (ACCC) is responsible for competition policy.

audit and related arrangements for prudential reporting. In exceptional circumstances. takeovers and compulsory buyouts and external administration/insolvency. Australian Competition and Consumer Commission The ACCC has responsibility for competition policy under the Competition and Consumer Act 2010 of Australia (formerly known as the Trade Practices Act). which prohibits anti-competitive arrangements between competitors. Other regulatory agencies Other primary regulatory agencies and bodies in Australia include the Australian Taxation Office (ATO). associations with related entities. APRA can appoint a statutory manager to assume full control of an ADI. credit risk. Australia. the RBA would rely on APRA’s judgment. outsourcing. conduct and disclosure provisions that apply to financial services providers (including ADIs). business continuity management. credit quality. as well as product disclosure provisions applicable to financial products. giving directions and assuming control of supervised entities in difficulty. market risk. APRA has developed a regulatory framework for ADIs under the Banking Act which is based on the banking supervision principles published by the Basel Committee on Banking Supervision. The ACCC’s consumer protection activities complement those of Australian state and territory consumer affairs agencies which administer separate unfair trading legislation. Australia’s Banking Industry > 45 . The regime includes licensing. liquidity. risk management of credit card activities. securitisation. insider trading and misleading or deceptive conduct. and into. governance and fit and proper management. policy holders and superannuation fund members and to maintain the stability of the financial system. Federal Treasury The Treasury is an executive arm of the Australian Government and focuses primarily on economic policy. market sharing and boycotts. ASIC is responsible for monitoring compliance by market and clearing and settlement facility licensees with the relevant legislative frameworks and the supervision of real time trading on all of Australia’s domestic licensed markets. the Australian Transaction Reports and Analysis Centre (AUSTRAC). ASIC has responsibility for the investor protection regime that applies to the provision of financial services in. It acts under the Australian Securities and Investments Commission Act 2001 of Australia and administers the Corporations Act 2001 of Australia (Corporations Act). including powers related to investigating. providing banking services for the Australian Government and managing Australia’s official reserve assets. which cover market manipulation. The framework for prudential regulation includes requirements regarding capital adequacy. Reserve Bank of Australia The RBA is responsible for maintaining stability of the overall financial system and monetary policy. sound corporate practices and safeguarding the public interest in matters such as consumer protection and foreign investment. promoting the safety and efficiency of the payments system (through the PSB). The RBA is also responsible for issuing financial stability standards for clearing and settlement facilities and it monitors compliance with those standards. the RBA may provide liquidity support to an individual ADI if the institution was solvent and its failure to make payments would have serious implications for the rest of the financial system. including the provisions governing the operation of companies in Australia. large exposures. the Federal Treasury also provides advice on policy processes and reforms for the promotion of a secure financial system. markets and financial services regulator. and the Foreign Investment Review Board (FIRB). ASIC is also responsible for (a) administering the market misconduct provisions of the Corporations Act. corporate fundraising. financial reporting. Australian Securities and Investments Commission ASIC is an independent statutory body that is Australia’s corporate. such as price fixing. In assessing solvency. managing the issuance of banknotes. Amongst a range of other domestic functions.› (d) powers to act in certain circumstances to protect depositors. the Privacy Commissioner. and (b) national credit regulation which includes licensing of all credit providers and credit service providers.

In addition. However. Australian Credit Licence Under the National Consumer Credit Protection Act 2009 (Cth) all persons that engage in ‘credit activities’ in Australia are now required to hold an Australian Credit Licence (ACL) from ASIC. The third and fourth options will only involve applying to ASIC for an AFSL.Summary of available operating models Overview Under the Banking Act. suggesting or assisting in relation to a particular credit contract or consumer lease. and (b) makes advances of money (or conducts certain other financial activities prescribed in the Banking Act). the first two options involve applying to APRA for authorisation as a representative office and/or an ADI and. collective investment vehicles. and do not involve conflicts of interest that are disadvantageous to debtors. for example. are likely to involve applying to ASIC for an AFSL (which can be made contemporaneously with an application to APRA). Depending on whether regulated ‘credit activities’ is undertaken.g. but under the common law ‘business’ imports notions of system. or enjoy the benefit of an exemption from the requirement to do so. or (b) a new Australian-incorporated subsidiary authorised as an ADI. APRA normally requires to a foreign bank considering the establishment of an Australian branch to first open a representative office. A credit activity includes: providing credit under a credit contract or consumer lease. the options will require applying to ASIC or ACL. A licensee must comply with disclosure and conduct obligations including. repetition and continuity and is to be assessed by reference to the activities of the entity as a whole. there are four primary options available to a foreign financial institution considering the establishment of an Australian operation: In the case of a foreign bank: › › › › (a) a representative office and then a branch authorised as a foreign ADI. honestly and fairly. An AFSL will also stipulate whether the financial service is to be provided to wholesale clients or both retail and wholesale clients. an entity must not conduct ‘banking business’ in Australia without authorisation from APRA. or (d) a new Australian-incorporated subsidiary operating as a NBFI. Other options may be available for specific types of foreign financial institutions (e. being a member of an external dispute resolution scheme. except in the case of a representative office. both (a) takes money on deposit (otherwise than as part payment for identified goods or services). Available Options In summary. co-operatives. In the case of a foreign financial institution which is not a bank: (c) a branch operating as a foreign non-bank financial institution (NBFI). Banking business includes any business that. government agencies and international organisations). 46 > Australian Trade Commission . a person who carries on a financial services business ‘in Australia’ is required to hold an Australian financial services licence (AFSL) from ASIC or enjoy the benefit of an exemption from requirement to do so. Insofar as regulatory approvals are concerned. and acting as an intermediary between a lender or lessor and a consumer (in relation to a credit contract or lease). the regime only applies to credit provided to individuals predominantly for personal. to any extent. or operate as a credit representative of an ACL holder. ‘Business’ is not defined under the Corporations Act. providing debtors with disclosure documents (such as ‘credit guides’) and meeting overarching requirements such as ensuring its credit activities are engaged in efficiently. The applicable AFSL must specifically cover each financial service that a person intends to provide and refer to each specific financial product for which that service is to be provided (see below). ensure that debtors are not entered into credit contracts that are unsuitable to them. partnerships.. domestic or household purposes or for investment in residential property.

62 Must comply with ongoing conduct obligations under the NCCP Act.gov. They can.pdf. ‘banker’. especially during the initial phase of operations.asic. whether that business is conducted within or outside Australia. nonresidents and their employees.Summary of requirements for each option Type of entity Process Comments A. 62. Need only comply with some of APRA’s prudential standards for foreign bank branch (see following). however. subject to adequate prudential standards consistent with Basel II and have received approval from home regulator to establish representative office. 61.au/ADI/upload/ADI-Guidelines-11-4-08. Australia’s Banking Industry > 47 .gov.nsf/byheadline/Regulatory+guides?openDocument#rg204.au/ADI/upload/APRA_GL_ROFB_032007_ex. ACL or appointment as credit representative required if undertaking ‘credit activities’ in Australia. Must be authorised as a bank in its home jurisdiction.apra. Regulatory Guide 204 Applying for a Credit License is available at: http://www. Branch as a foreign ADI Consent from APRA Application must comply with APRA’s guidelines. Minimum entry standards Operating conditions Register as a foreign company ACL from ASIC B. 63. The guidelines are available at: http://www. The guidelines are available at: http://www. ‘banking’ or cognate expressions in Australia in connection with a financial services business carried on by that person.gov.apra. The branch must also disclose that it is not subject to the depositor protection provisions of the Banking Act. deal in or issue securities or buy or sell foreign exchange – see APRA’s guidelines. enter into derivatives. accept deposits and other funds in any amount from incorporated entities. The activities of the representative office must be confined to a pure liaison office.000.63 A branch of a foreign ADI is not permitted to accept initial deposits (and other funds) from individuals and non-corporate institutions of less than A$250.pdf. Application to ASIC. including responsible lending requirements.61 Required under section 66 of the Banking Act which provides that a person must obtain consent from APRA to assume or use the words ‘bank’. Representative office Consent from APRA Consent to use word ‘bank’ The activities of the representative office are limited to those set out in APRA’s guidelines. APRA may impose conditions on the operations of a foreign bank branch. There is ASIC Guidance that assists applicants apply for an ACL. and provide ASIC with an Annual Compliance Certificate. In particular. a representative office cannot grant loans.au/asic/asic. of substance and high standing.

Type of entity Process Comments Consent to use the word ‘bank’ Minimum authorisation criteria Required under section 66 of the Banking Act. large exposures. audit and information and prudential reporting (although in some cases only some of the provisions of the prudential standards apply to branches of foreign banks). outsourcing. APRA also expects that the vast majority of business undertaken by the foreign bank with Australian customers (excluding nonAustralian operations of such customers) will be undertaken through the branch in Australia. Business plan – applicants must provide APRA with a 3-5 year business plan and APRA will not authorise a foreign bank as an ADI unless the business plan demonstrates that a real and substantial business is to be carried on in Australia. entity specific prudential requirements where it believes they are necessary. Capital – not required to maintain endowed capital in Australia. but the foreign ADI must be subject to comparable capital adequacy standards in its home jurisdiction. risk management. APRA can also impose additional. credit quality. associations with related entities. subject to adequate prudential standards consistent with Basel II and have received approval from home regulator to establish a branch. Ownership – subject to limits under the Financial Sector (Shareholdings) Act 1998 of Australia (FSSA). Prudential standards – must comply with APRA’s prudential standards in relation to corporate governance. Home jurisdiction requirements – must be authorised as a bank in its home jurisdiction. business continuity management. of substance and high standing. unless there are sound and prudent business reasons for particular businesses or financial accommodation to be provided by branches outside Australia. Direct or indirect holdings of 15 per cent of more are subject to a national interest test and must be approved by the Federal Treasurer. 48 > Australian Trade Commission . liquidity. securitisation and funds management.

Direct or indirect holdings of 15 per cent of more are subject to a national interest test and must be approved by the Federal Treasurer. ACL from ASIC ACL or appointment as credit representative required if undertaking ‘credit activities’ in Australia. depending on the risk profile of the proposed operations. derivatives. Capital – a minimum capital base of A$50 million.Type of entity Process Comments Register as a foreign company AFSL from ASIC Application to ASIC. of which at least half must be made up of a Tier 1 capital (i. Must comply with ongoing conduct obligations under the NCCP Act. Audit and other reports must be provided to ASIC on an ongoing basis. Home jurisdiction requirements – must have received approval from home regulator to establish a local bank subsidiary. Locally-incorporated subsidiary as an ADI Consent from APRA Application must comply with APRA’s guidelines and are subject to the same prudential standards and legislation as local banks.. and provide ASIC with an Annual Compliance Certificate. Required if the branch proposes providing certain financial services (such as advice) and financial products (such as. Newly established ADIs may be subject to a higher minimum capital ratio in their formative years. Locally incorporated ADIs are currently required to maintain at all times a minimum capital ratio of 8 per cent. dealing in or issuing securities. especially during the initial phase of operations. A locally incorporated ADI can undertake all types of banking business. C. including responsible lending requirements. a minimum Tier 1 capital ratio of 4 per cent). Australia’s Banking Industry > 49 . There are exemptions from some of the audit obligations where the holder of an AFSL is a foreign ADI where equivalent reports prepared for the overseas regulator of the foreign ADI are lodged with ASIC.e. There is ASIC Guidance that assists applicants apply for an ACL. Consent to use the word ‘bank’ Minimum authorisation criteria Required under section 66 of the Banking Act. APRA may impose conditions on the operations of a newly established bank. foreign exchange contracts) – see below. Ownership – subject to limits under the Financial Sector (Shareholdings) Act 1998 of Australia (FSSA).

Audit and other reports must be provided to ASIC on an ongoing basis. dealing in or issuing securities. Must comply with ongoing conduct obligations under the NCCP Act. including responsible lending requirements. outsourcing. have positive net assets. derivatives. dealing in or issuing securities. including responsible lending requirements. Required if the branch proposes providing certain financial services (such as advice) and financial products (such as. Foreign subsidiary branch as a NBFI Register as a foreign company AFSL from ASIC Application to ASIC. liquidity.Type of entity Process Comments Prudential standards – must comply with all APRA’s prudential standards (including in relation to corporate governance. risk management. entity specific prudential requirements where it believes they are necessary. on an ongoing basis. ACL from ASIC ACL or appointment as credit representative required if undertaking ‘credit activities’ in Australia. be solvent (i.e. Business plan – applicants must provide APRA with a 3-5 year business plan. securitisation and funds management. Must comply with ongoing conduct obligations under the NCCP Act. (ii) at all times. foreign exchange contracts) – see below. credit quality. (i) at all times. ACL from ASIC ACL or appointment as credit representative required if undertaking ‘credit activities’ in Australia. large exposures. Audit and other reports must be provided to ASIC on an ongoing basis.. (iii) have sufficient cash resources to cover the next three months’ expenses with adequate 50 > Australian Trade Commission . business continuity management. audit and information and prudential reporting). associations with related entities. be able to pay its debts as and when they become due and payable). a NBFI holder of an AFSL must. capital adequacy. APRA can also impose additional. Required if the ADI proposes providing certain financial services (such as advice) and financial products (such as. foreign exchange contracts) – see below. Financial requirements for non-ADI holders of an AFSL In summary. Establish subsidiary AFSL from ASIC Application to ASIC. D. and provide ASIC with an Annual Compliance Certificate. There is ASIC Guidance that assists applicants apply for an ACL. derivatives. and provide ASIC with an Annual Compliance Certificate. There is ASIC Guidance that assists applicants apply for an ACL.

have adjusted surplus liquid funds of between A$50. including responsible lending requirements.000 in value. APRA will not grant consent under section 66 of the Banking Act to a NBFI. (iv) if holding client money or properties which equal or exceed A$100.000 in surplus liquid funds. Audit and other reports must be provided to ASIC on an ongoing basis. derivatives. which is an electronic licence application process.000 in accordance with ASIC’s requirements. ‘banker’. and provide ASIC with an Annual Compliance Certificate. foreign branch or locally incorporated ADI in Australia is to apply to APRA for authorisation to do so and to use the words ‘bank’.000 and A$100. Australia’s Banking Industry > 51 . but the usual practice is to submit a letter (together with attachments) that satisfy the criteria in the relevant guidelines published by APRA. Required if the NBFI proposes providing certain financial services (such as advice) and financial products (such as. The authorisation and application processes The first step in establishing a representative office. foreign exchange contracts) – see below. The process requires an applicant to identify the specific financial services and financial products it wishes to provide and the types of customers to whom these financial services and products are to be provided. dealing in or issuing securities. ACL from ASIC ACL or appointment as credit representative required if undertaking ‘credit activities’ in Australia. Financial requirements fo non-ADI holders of an AFSL Cannot use the word ‘bank’ As for a foreign subsidiary branch as a NBFI (see above). Cannot use the word ‘bank’ APRA will not grant consent under section 66 of the Banking Act to a NBFI. Usually. There is a no formal application form.Type of entity Process Comments cover for contingencies. the minimum time for APRA to approve an application for a representative office is 3-6 months from submission of an application with all required information attached.000. There is ASIC Guidance that assists applicants apply for an ACL. Must comply with ongoing conduct obligations under the NCCP Act. The process for authorisation as a branch of a foreign ADI or a locally incorporated ADI is longer and can take up to 12 months (or longer in certain circumstances) from the date the initial application is made to APRA. The process for applying for an AFSL is called ‘eLicensing’. ‘banking’ and cognate expressions. E. and (v) if incurring adjusted liabilities or contingent liabilities equal to or exceeding A$100. have A$50. Locally incorporated subsidiary as a NBFI Establish subsidiary AFSL from ASIC Application to ASIC.000 in providing a financial service by entering into transactions with clients. A list of the supporting documentation (known as ‘proofs’) required will be produced automatically by the eLicensing service on the basis of that information.

ASIC has provided a number of class order exemptions of general application for some regulated foreign financial institutions which operate in jurisdictions which have a similar level of investor protection to Australia. ASIC aims to decide whether to grant or vary an AFSL within 28 days of receiving a complete application – although can take longer if it involves complex issues or information is incomplete. most insurance contracts.e. including being able to comply with the general conduct obligations under the National Credit Act.The proofs are designed to demonstrate to ASIC how the applicant meets. which include: › › › › › (a) providing financial product advice. The specific exclusions to the definition are generally products that are more suitably regulated under some other regime (such as credit facilities and a facility for the exchange and settlement of non cash payments betwen providers of non cash payment facilities). The process is similar to the one outlined above in relation to an AFSL. and (e) providing a custodial or depository service. These exemptions only permit financial services to provided to ‘wholesale clients’ (see below). collective investment vehicles). (b) dealing in a financial product. or will meet.. The process for applying for an ACL can occur by completing and lodging an online application form and paying the applicable application fee. but must meet the requirements for a credit license. What is a financial product? Financial product is defined in general terms and there are specific inclusions and exclusions. The general definition is that a ‘financial product’ is any facility through which a person: › › › (a) makes a financial investment.e. there are few exemptions of general application. This applies even if the facility is acquired for some other purpose. Specific inclusions are equity and debt securities. derivatives. or (c) makes non-cash payments. are subject to some other conditions and involve submitting a standard form deed of reliance to ASIC and providing certain information to ASIC every six months. The specific inclusions to the definition of ‘financial product’ illustrate the wide scope of the concept. Australian financial services licences Introduction As noted above. The proofs may be both specific to the entity applying for the AFSL or may cover a corporate group. interests in managed investment schemes. An applicant is not automatically entitled to a credit licence. (d) operating a registered managed investment scheme (i. What is a financial service? A person provides a financial service if they engage in certain activities. On lodging a complete application. the AFSL conditions. pension) products. Generally. most superannuation (i. which aim to ensure that the credit business operates properly. the proofs will either be existing documents or a description of systems and processes. person who carries on a financial services business ‘in Australia’ is required to hold an AFSL from ASIC or enjoy the benefit of an exemption from requirement to do so. It is not possible to commence the eLicensing process until an Australian entity is established or a foreign branch is registered and an Australian Company Number (ACN) is received from ASIC.. and satisfy the fit and proper person requirements to engage in credit activities. Although there are numerous exemptions available for particular financial services and/or financial products. foreign exchange contracts. (c) making a market for a financial product. most deposit taking facilities provided by Australian ADIs and government debenture and bond issues. (b) manages financial risk. 52 > Australian Trade Commission .

Further. foreign exchange contracts (excluding most spot transactions) or other financial products.e. (b) suspicious transactions. New laws to change the way to take security in Australia The Personal Property Securities Act 2009 of Australia (‘PPSA’) commenced on 15 December 2009. including: › › › (a) cash transactions of A$10. it will have a retroactive effect on security interests and security agreements arising before that time. In summary. all property other than land). title retention arrangements and flawed asset arrangements. Retail and wholesale clients An AFSL will also stipulate whether the financial service is to be provided to wholesale clients or both retail and wholesale clients. as well as the verification of the identity of persons who are signatories to accounts. then there should be no particular licensing requirements as credit facilities are not financial products for the purposes of the AFSL regime. for tax reasons. (b) a business test: the product or service is provided in connection with a business that is not a small business (this normally means at least 20 employees). If the loan is a bilateral or syndicated ‘credit facility’. The PPSA will establish a national system for the registration of security interests in personal property (i. More structured transactions may involve derivatives. if the loan is structured as an issue of ‘debentures’. together with new rules for the creation. a type of debt security). It extends the concept of security to capture many transaction not now registrable or considered to be a security interest. which is a financial product. Anti-money laundering and similar laws AUSTRAC acts as the regulator for both the Financial Transactions Report Act 1988 of Australia and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 of Australia.000 (or such other amount set by regulation). It will radically alter many long-standing rules relating to title and the taking of security and will result in significant changes to secured transactions and lending practices. as an issue of ‘debentures’ (i. Financial institutions are required to establish a compliance plan to ensure that the reporting and other obligations under both Acts are satisfied. However. if necessary. the Privacy Act requires that such ‘personal information’ not be used for a purpose other than that for which it was collected and not be disclosed to anyone else unless the person concerned has consented or the law requires it. Other considerations Privacy laws The Privacy Act 1988 of Australia (‘Privacy Act’) requires that ‘personal information’ must not be collected unless the person concerned either consents or is informed why it is being collected.000 or more or the foreign currency equivalent. is required.e. whether given by a company or a natural person. who will use it.5 million or income for each of the last two years is at least A$250. (c) an individual wealth test: the client’s net assets are at least A$2. a person is a ‘wholesale client’ if at least one of the following four tests applies (all other persons are retail clients): › › › › (a) a value test: the consideration payable for the investment is at least A$500.. priority and enforcement of security interests in personal property. and (d) a professional investor (as broadly defined in the Corporations Act) test. Once the PPSA begins to apply. but will not apply until a date to be announced in October 2011. then it may be necessary for a lender to hold an AFSL. leases of property. and how the person may access it and correct it.000 (or such other amounts set by regulation). Australia’s Banking Industry > 53 . such as assignments of receivables.Loans in Australia can be structured as a ‘credit facility’ or. which will also require the provider of those financial products to hold an AFSL. and (c) international funds transfer instructions. The reporting of financial transactions..

and The foreign bank should not otherwise be deemed to have a taxable presence in Australia. These treaties are commonly referred to as ‘double tax agreements’ or ‘DTAs’ and can apply when a foreign financial institution from a relevant country sets up an Australian operation. Taxation of business profits No significant Australian tax issues should generally arise on the basis that: › › The foreign bank should not be held to be carrying on business through a permanent establishment in Australia.Taxation This section summarises the Australian taxation laws that are most likely to apply when a foreign financial institution sets up an Australian operation. Representative office Activities limited solely to liaison and marketing activities. 54 > Australian Trade Commission . However. subject to relief under an applicable DTA (e. Summary The following table summarises the key Australian tax considerations in relation to each of the alternative business structures that could be adopted when establishing a financial institution in Australia. Type of entity Key tax considerations 1.g. 1. exemption for qualifying financial institutions). Exemption from IWT may be available in relation to publicly offered funding from unrelated lenders (commonly referred to as the section 128F exemption).1 IWT will also generally apply to other offshore funding at the rate of 10 per cent1. Taxation treatment of funding options The funding of the branch will generally be treated in the following way: › › › Interest withholding tax (IWT) will generally apply to offshore interbranch funding at the rate of 5 per cent.. 2. and no banking business conducted in Australia. Branch authorised as a foreign ADI Taxation of business profits The Australian taxable income of the branch as a foreign ADI will generally be subject to Australian tax at the ordinary corporate rate (currently 30 per cent). Refer to the proposed reduction in IWT that follows. a full discussion of all relevant issues is beyond the scope of this publication and it is necessary to seek independent tax advice in all cases. Australia has also entered into tax treaties with over forty countries to prevent double taxation and allow co-operation between Australia and overseas authorities in enforcing their respective tax laws. Taxation treatment of funding options Not generally applicable.

provided that the activities of the office are limited solely to liaison and marketing activities. Taxation of business profits The business profits of an Australian branch or an Australian subsidiary of a foreign financial institution will generally be subject to Australian tax at the ordinary corporate rate (currently 30 per cent). exemption for qualifying financial institutions).Type of entity Key tax considerations 3. certain other prescribed debt interests and certain syndicated loans (commonly referred to as the section 128F exemption). exemption for qualifying financial institutions).. under Australian tax legislation. the payee is exempt from tax in both Australia and home country. In contrast. subject to relief under an DTA (e. Exemptions from IWT Australian tax law does provide for a number of exemptions to IWT. but may be reduced depending on the terms of any applicable DTA between Australia and the jurisdiction of the recipient.g. Taxation treatment of funding options When is interest withholding tax payable? A foreign financial institution that has an Australian subsidiary or an Australian branch may be subject to IWT. through a representational office) will not generally be liable to pay Australian income tax. and the payee is specifically exempt from IWT (e. 1.. IWT is imposed at the rate of 10 per cent. Exemption from IWT may be available in relation to publicly offered funding from unrelated lenders (commonly referred to as the section 128F exemption). or the payee is an exempt foreign pension fund). Broadly. and the office does not conduct any banking business in Australia.. Taxation treatment of funding options The funding of each entity will generally be treated in the following way: › › IWT will generally apply to offshore funding at the rate of 10 per cent1. foreign subsidiary branch operating as a foreign non-bank financial institution (NBFI). or locally incorporated subsidiary operating as a NBFI Taxation of business profits The Australian taxable income of each entity will generally be subject to Australian tax at the ordinary corporate rate (currently 30 per cent).g.g.g. These include. interest that is paid to a non-resident is generally subject to withholding tax where the payment is made by an Australian resident or a non-resident acting through an Australian permanent establishment (e. interest is paid by offshore banking units (OBU) in relation to certain borrowings. where: › › › › interest is paid on publicly offered debentures. an Australian branch). interest payments qualify for exemption under an applicable DTA (e.. Australia’s Banking Industry > 55 .. non-equity shares. a foreign financial institution which merely carries on activities of a preparatory or auxiliary nature in Australia (e.g. Refer to the proposed reduction in IWT that follows. The Government has announced that it intends to reduce the corporate tax rate to 29 per cent from the 2013-14 income year. No IWT is generally imposed on domestic payments of interest (including payments made to foreign banks which are in receipt of the funds through a permanent establishment in Australia). Locally-incorporated subsidiary authorised as an ADI.

head office) and its Australian branch. If the payer of interest was required to ‘gross-up’ payments to the payee. Norway. Additional requirements apply before interest paid on certain syndicated loans will be exempt from IWT.. Broadly. (b) the debt instruments were issued under an offer which satisfies the ‘public offer’ test (which is defined under Australian tax legislation). New Treaties have been concluded with each of Finland. Deductibility of IWT Generally. However.g. an exemption from IWT is available in respect of interest derived by: › › (a) the government and certain governmental authorities and agencies of the Specified Country. the law treats the Australian branch and the foreign bank as separate legal entities and the Australian branch is taken to have borrowed the amount from the foreign bank. Exemption for certain publicly offered debentures (section 128F exemption) In broad terms. Japan. special taxation rules will apply in relation to certain financing transactions between the foreign bank (e. Where the Australian branch records a payment of interest in respect of this notional borrowing. France.64 This includes interest payments to a bank or other entity that derives most of its profits by carrying on a business of raising and providing finance. funding transactions between a foreign bank and its Australian subsidiary may still be subject to IWT at the usual rate of 10 per cent. 56 > Australian Trade Commission . This deduction should be gross of any IWT imposed on the interest payments. the payee is an ‘associate’ of the issuer. New Zealand. and (ii) at the time of the payment of interest. non-equity shares and prescribed debt instruments is exempt from IWT if the following conditions are met: › › › (a) the issuer is a company which is a resident of Australia (or a non-resident carrying on business through an Australian branch) when it issues debt instruments and at the time when interest is paid. Broadly. Notional borrowing by an Australian branch of a foreign bank Where a foreign bank conducts business in Australia through an Australian branch. and (b) a ‘financial institution’ which is a resident of a Specified Country and which is unrelated to and dealing wholly independently with the payer of interest. a branch or subsidiary of a foreign financial institution which pays interest should be entitled to a tax deduction in respect of the interest paid when calculating its Australian taxable income. under Australian taxation law. 64. No deduction will generally arise to the extent that there is a failure to withhold an amount on account of IWT. where the foreign bank makes an amount available for use by the Australian branch and the amount is recorded in the branch’s accounting records as having been provided by the bank to the branch. the United Kingdom and the United States. the payer should also be entitled to a tax deduction for the grossed-up amount. Phasing down Australian IWT for financial institutions The Australian Government announced in the 2010-11 Federal Budget that it would phase down the IWT payable by financial institutions on most interest paid on offshore borrowings. interest paid under a back-to-back loan or an economically equivalent arrangement will not qualify for this exemption. Accordingly. and (c) the issuer does not know. interest paid on publicly-offered debentures. For example. Exemptions under Australia’s new DTAs The Australian Government has entered into new DTAs (New Treaties) with a number of countries (Specified Countries) which contain certain exemptions from IWT. or have reasonable grounds to suspect. that: (i) at the time of issue the debt instruments would be acquired by an ‘associate’ of the issuer.The exemptions that are most likely to apply to a foreign financial institution acting through an Australian subsidiary or an Australian branch are outlined below. including when an Australian subsidiary or an Australian branch of a foreign financial institution pays interest on borrowings from their overseas parent. South Africa. the notional interest is deemed to have been paid to the foreign bank and the branch and is subject to IWT at the reduced rate of 5 per cent. This special tax treatment does not apply to locally incorporated subsidiaries of a foreign bank.

and funds management companies. registered life insurance companies.5% Exempt Exempt 10% 5% (aspirational target of zero) Exempt 5% (aspirational target of zero) Exempt Exempt 10% Type of borrowing Financial institution borrows from a foreign financial institution (where not exempt under a DTA) Foreign bank branch borrows from overseas head office Financial institution borrows from offshore retail deposits (proceeds used and traced to Australian operations) Financial institution borrows in a section 128F compliant manner Offshore banking unit (borrows and on-lends offshore) Financial institution borrows from non-resident retail deposits held in Australia Source: Treasurer’s press release number 035/2010 issued on 11 May 2010 Current IWT position 0% 5% 10% Exempt Exempt 10% Special treatment for offshore banking units Entities that are OBUs are effectively subject to a reduced tax rate of 10 per cent on eligible income (rather than at the general corporate tax rate of 30 per cent) and are not required to pay IWT on certain borrowings. An entity becomes an OBU when its OBU status is declared by the Treasurer in a Gazette notice. The thin capitalisation rules are complex and need to be considered on a case-by-case basis. Australia’s Banking Industry > 57 . Thin capitalisation Australia’s thin capitalisation rules seek to limit the amount of debt used to fund Australian operations or investments. Generally.5% 7. In very broad terms. A recent report by the Australian Financial Centre Forum – Australia as a Financial Centre Forum: Building on our strengths recommended that the Government improve Australia’s attractiveness as a financial hub by publicising the OBU regime more widely and by simplifying the process for obtaining OBU status. OBU status is generally available for ADIs. this is achieved by disallowing debt deductions (such as interest payments) that an entity can claim against Australian assessable income where the entity is too thinly capitalised. state banks.The following table summarises the current and proposed IWT position: Future IWT position From 2013-14 From 2014-15 7.5% 2. they are normally manageable for financial institutions which operate in Australia. however. certain dealers in foreign exchange.

asn.asn.gov.au www.com.gov.abacus.avcal.au www.aist.moneysmart.au www.gov.gov.gov.au www.au www.gov.accc.org www.afma.gov.com.au www.au www.asn.ifsa.au www.asic.futurefund.Useful Links Primary Regulators › Australian Prudential Regulation Authority › Australian Securities and Investments Commission › Reserve Bank of Australia Australian Government › Australian Bureau of Statistics › Australian Competition and Consumer Commission › Australian Taxation Office › Australian Trade Commission › Australian Transaction Reports and Analysis Centre › Federal Treasury › Foreign Investment Review Board › Future Fund › MoneySmart Other › Abacus (credit union and building society industry body) › Alternative Investment Management Association › Association of Superannuation Funds of Australia › Australian Accounting Standards Board › Australian Bankers Association › Australian Equipment Lessors Association › Australian Finance Conference › Australian Financial Markets Association › Australian Institute of Superannuation Trustees › Australian Payments Clearing Association › Australian Securities Exchange › Australian Securitisation Forum › Australian Private Equity & Venture Capital Association › Financial Planning Association › Financial Services Council › Financial Services Institute of Australasia › Fund Executives Association Ltd www.au www.gov.au www.apra.aasb.au www.com.asn.aela.apca.com.aima-australia.au www.au www.asx.austrac.rba.au www.asn.bankers.com.au www.abs.gov.au www.au www.au www.au www.finsia.firb.au 58 > Australian Trade Commission .au www.fpa.afc.au www.asn.au www.au www.au www.au www.org.gov.austrade.feal.asn.gov.au www.com.superannuation.com.com www.treasury.ato.gov.securitisation.

Ltd. 65 The Bank of Nova Scotia The People’s Bank of China Union Bank of India Wells Fargo Bank.A. National Association Lloyds TSB Bank plc Mega International Commercial Bank Co.A.V JPMorgan Chase Bank. National Association Bank of China Ltd Bank of Scotland plc Barclays Capital BNP Paribas China Construction Bank Corporation Citibank.A.Appendix A – Banking Institutions Domestic Banks – Four Major Banks Australia and New Zealand Banking Group Ltd Commonwealth Bank of Australia National Australia Bank Ltd Westpac Banking Corporation Domestic Banks – Other AMP Bank Ltd Bank of Queensland Ltd Bank of Western Australia Ltd Macquarie Bank Ltd Members Equity Bank Pty Ltd Rural Bank Ltd Suncorp-Metway Ltd Foreign Bank Subsidiaries Arab Bank Australia Ltd Bank of China (Australia) Ltd Bank of Cyprus Australia Ltd Beirut Hellenic Bank Ltd Citigroup Pty Ltd HSBC Bank Australia Ltd ING Bank (Australia) Ltd Investec Bank (Australia) Ltd Rabobank Australia Ltd Foreign Bank Representative Offices Agricultural Bank of China Banco Bilbao Vizcaya Argentaria S. S. N. The Royal Bank of Scotland PLC The Toronto-Dominion Bank UBS AG United Overseas Bank Ltd WestLB AG Bendigo and Adelaide Bank Ltd Bank of Western Australia Ltd is a wholly owned subsidiary of the Commonwealth Bank of Australia. National Association Foreign Bank Branches Bank of America. Oversea-Chinese Banking Corporation Ltd Rabobank Nederland Royal Bank of Canada Société Générale Standard Chartered Bank State Bank of India State Street Bank and Trust Company Sumitomo Mitsui Banking Corporation Taiwan Business Bank The Bank of New York Mellon The Bank of Tokyo-Mitsubishi UFJ. Bank Hapoalim B. Credit Suisse AG Deutsche Bank Aktiengessellschaft First Commercial Bank Industrial and Commercial Bank of China Ltd ING Bank N.V.. Ltd The Hongkong and Shanghai Banking Corporation Ltd The Northern Trust Company The Royal Bank of Scotland N. Bank of Baroda Bank of Communications Co. Australia’s Banking Industry > 59 .. Banco Santander. Ltd.c China Construction Bank Corporation Commerzbank AG Credit Industriel et Commercial National Bank of Greece SA Saxo Bank A/S 65. Mizuho Corporate Bank.M. Ltd.l. Bank Leumi Le-Israel BM Bank of Valletta p.

W. Mining & Power Credit Union Ltd MCU Ltd MECU Ltd Melbourne University Credit Union Ltd MemberFirst Credit Union Ltd MyState Financial Ltd New England Credit Union Ltd Newcom Colliery Employees Credit Union Ltd Northern Inland Credit Union Ltd Nova Credit Union Ltd Old Gold Credit Union Co-operative Ltd Orange Credit Union Ltd Phoenix (N.) Credit Union Ltd Plenty Credit Co-operative Ltd Police & Nurses Credit Society Ltd Police Association Credit Co-operative Ltd Police Credit Union Ltd Pulse Credit Union Ltd Qantas Staff Credit Union Ltd Queensland Country Credit Union Ltd Queensland Police Credit Union Ltd Queensland Professional Credit Union Ltd Queensland Teachers’ Credit Union Ltd Queenslanders Credit Union Ltd 60 > Australian Trade Commission .S.Appendix B – Credit Unions and Building Societies Credit Unions Alliance One Credit Union Ltd Allied Members Credit Union Ltd AMP Credit Union Ltd Australian Central Credit Union Ltd Australian Country Credit Union Ltd (trading as Reliance Credit Union) Australian Defence Credit Union Ltd AWA Credit Union Ltd Bananacoast Community Credit Union Ltd Bankstown City Credit Union Ltd Berrima District Credit Union Ltd Big Sky Credit Union Ltd CAPE Credit Union Ltd Central Murray Credit Union Ltd Central West Credit Union Ltd Circle Credit Co-operative Ltd Coastline Credit Union Ltd Collie Miners Credit Union Ltd Community Alliance Credit Union Ltd Community CPS Australia Ltd Community First Credit Union Ltd Country First Credit Union Ltd Credit Union Australia Ltd Credit Union SA Ltd Defence Force Credit Union Ltd Dnister Ukrainian Credit Co-operative Ltd EECU Ltd Electricity Credit Union Ltd Encompass Credit Union Ltd Family First Credit Union Ltd Fire Brigades Employees’ Credit Union Ltd Fire Service Credit Union Ltd Firefighters & Affiliates Credit Co-operative Ltd First Choice Credit Union Ltd First Option Credit Union Ltd Fitzroy & Carlton Community Credit Co-Operative Ltd Ford Co-operative Credit Society Ltd Gateway Credit Union Ltd Geelong & District Credit Co-operative Society Ltd Goldfields Credit Union Ltd Goulburn Murray Credit Union Co-operative Ltd Heritage Isle Credit Union Ltd Holiday Coast Credit Union Ltd Horizon Credit Union Ltd Hunter United Employees’ Credit Union Ltd Industries Mutual Credit Union Ltd Intech Credit Union Ltd La Trobe University Credit Union Co-Operative Ltd Laboratories Credit Union Ltd Latvian Australian Credit Co-operative Society Ltd Lithuanian Co-operative Credit Society “Talka” Ltd Lysaght Credit Union Ltd MacArthur Credit Union Ltd Macquarie Credit Union Ltd Manly Warringah Credit Union Ltd Maritime.

A. Staff Credit Union Ltd Select Credit Union Ltd Service One Credit Union Ltd SGE Credit Union Ltd Shell Employees’ Credit Union Ltd South West Slopes Credit Union Ltd Southern Cross Credit Union Ltd South-West Credit Union Co-Operative Ltd Summerland Credit Union Ltd Sutherland Credit Union Ltd Swan Hill Credit Union Ltd Sydney Credit Union Ltd Tartan Credit Union Ltd Teachers Credit Union Ltd The Broken Hill Community Credit Union Ltd The Capricornian Ltd The Gympie Credit Union Ltd The Police Department Employees’ Credit Union Ltd The University Credit Society Ltd Traditional Credit Union Ltd TransComm Credit Co-operative Ltd Victoria Teachers Credit Union Ltd Wagga Mutual Credit Union Ltd Warwick Credit Union Ltd WAW Credit Union Co-Operative Ltd Woolworths Employees’ Credit Union Ltd Wyong Council Credit Union Ltd Building Societies ABS Building Society Ltd B & E Ltd Greater Building Society Ltd Heritage Building Society Ltd Hume Building Society Ltd IMB Ltd Lifeplan Australia Building Society Ltd Maitland Mutual Building Society Ltd Newcastle Permanent Building Society Ltd The Rock Building Society Ltd Wide Bay Australia Ltd Australia’s Banking Industry > 61 .Railways Credit Union Ltd Resources Credit Union Ltd R.T.

ING DIRECT employs some 900 people in Australia.bocau.3 billion in loans and advances to households.4 million customers. Citi. HSBC first entered Australia through the establishment of a finance company in 1965 and obtained a full banking license in 1986. The bank first entered Australia with an online interest earning savings deposit account. ING DIRECT also offers home loans and business banking and deposit services.citibank. › www. and Australian businesses with trade and investment links to China. Chinese students studying in Australia. They target their retail services to highend expatriates and customers with continued links between Asia and Australia. ranking fifth in terms of credit card loans outstanding.hsbc.com.2 billion in retail deposits. With retail deposits as at September 2010 of approximately A$3. › www.au Citibank Citibank’s presence in Australia extends back to 1971. Melbourne. In Australia.300 staff. ING DIRECT expanded its deposit service offering to include an everyday transaction account – Orange Everyday. Citibank is one of the largest foreign banks servicing Australia’s retail banking sector.au 62 > Australian Trade Commission . › www.com. Bank of China (Australia) Limited. Citibank holds approximately A$6. Bank of China recommenced its operations in Australia and has since set up its Australian headquarters in Sydney’s York Street and established seven branches in Sydney.au ING DIRECT ING DIRECT launched in Australia in 1999 and pioneered branchless banking. Most recently. and services over 1 million customers in Australia. ING DIRECT has approximately 1. In 2005. the Australian subsidiary of Bank of China. employs approximately 2.9 billion and A$7. It has grown to become the fifth largest retail bank in Australia and largest foreign bank competitor in the retail banking sector. HSBC offers a full range of consumer. › www. Chinese companies investing in Australia.Appendix C – Foreign Retail Banks in Australia Bank of China In 1985. Citibank is one of the largest credit card issuers in Australia. just behind the big four domestic banks. The bank offers a wide range of corporate and personal banking services in Australia and targets the local Chinese community.au HSBC HSBC operates through a network of 35 branches and offices in Australia. the parent company of Citibank in Australia. governments and institutions a full range of financial products and services.com. and has more than A$13 billion in loans and advances to households.7 billion in loans and advances to the household sector. HSBC is the third largest foreign bank competitor in the retail banking sector.ingdirect. The organisation was the first foreign bank to be granted a banking license in 1985 and today provides consumer. was established in Sydney. Headquartered in Sydney. commercial and institutional banking services. corporations. Perth and Brisbane.com. A$17 billion in retail deposits and A$36.

term deposits and online access to a selection of wholesale managed funds. As at September 2010.8 billion in retail deposits.rabodirect.au Australia’s Banking Industry > 63 . which was renamed Rabobank Australia in 2003. Rabobank held A$1. › www.Rabobank Rabobank first entered Australia in 1994. through the acquisition of Primary Industry Bank of Australia. which was rebranded RaboDirect in May 2010. The bank entered the retail banking space in May 2007 with the launch of its RaboPlus internet bank.com. Rabobank operates through 51 branches throughout Australia and targets primarily the rural and agricultural sector. RaboDirect offers a range of high interest savings. the same year Rabo acquired Lend Lease Agro Business in Australia.

fixed income products. ANZ has seven branches and sub branches and holds the maximum allowable investments in two significant Chinese banks: Shanghai Rural Commercial Bank and Bank of Tainjin. ANZ has a 55 per cent owned joint venture with 18 branches. Vietnam and India. 12 Pacific countries. institutional and commercial banking capabilities. corporate lending. the bank has grown from one branch with a small institutional client base in 2008 to a pan-island network of 22 branches serving 1 million clients. however. The bank’s Indonesian subsidiary employs more than 1600 people and has been operating for more than 14 years. Europe (London and Frankfurt) and New York. with operations in 12 Pacific countries. In Europe. Hong Kong. and 124 ATMs serving 90. Cambodia and Laos) the bank’s aim is to become the leading foreign bank. CBA established a second European branch in Malta in 2005. The bank provides retail banking services (savings accounts. In the Asia-Pacific. private banking.anz. money markets and private placements). as well as an extensive EFTPOS network and call centre in Vietnam. loans. the bank has approximately 100 employees and has had a branch in the UK since 1913. To achieve this vision. › www. Indonesia. 64 > Australian Trade Commission . CBA has operations in China. wealth. CBA also made a 15 per cent investment in local Vietnamese bank. with the aim of becoming a ‘super-regional bank’ increasing its presence in the region to around 20 per cent of earnings by 2012. Indonesia. wealth and insurance/ bancassurance. natural resources and global market services (foreign exchange. ANZ is also the leading bank within the Pacific region. the bulk of its international growth initiatives are centred in the Asia-Pacific region. 15 Asian markets (including the Middle East). Singapore. building branch networks in Indonesia. the bank’s New York branch was established in 1977 and focuses on corporate banking activities in infrastructure.000 shared ATMs. The bank recently acquired select businesses from Royal Bank of Scotland in Singapore. In China.000 customers. Indonesia. VIB. The bank was granted a universal bank licence in the Philippines in January 2010 and has 28 branches across 11 cities with almost 1. and in Laos. in emerging markets where there are young and well-educated populations. In the greater Mekong region (Vietnam.346 branches and offices worldwide with operations in Australia. 100 ANZ branded ATMS and 1. In Taiwan. commodities. and asset finance. derivatives. In Cambodia. The focus of its current growth strategy is the Asia-Pacific. Taiwan.au Commonwealth Bank of Australia The Commonwealth Bank of Australia (CBA) has operations and investments globally. This means ANZ can apply for a renminbi licence and will allow the bank to provide domestic retail and business banking services along with foreign currency products to its institutional clients. strong economic growth and strong. ANZ currently has 11 offices. Philippines and Hong Kong. ANZ has grown from a single branch serving institutional and private banking clients in 2008 to having six branches with full retail. In 2010. New Zealand. CBA established its Ho Chi Minh City branch in 2008 after having had a representative office in Hanoi since 1994. Vietnam and India.com. ANZ is the only international bank. The Bank’s Asian Growth strategy is focused on building long-term growth opportunities in the areas of banking. ANZ has been investing significantly in the region. focused primarily on commercial banking solutions in infrastructure and utilities. It offers retail banking services and foreign exchange through 84 branches and 100 ATMs across 22 Indonesian cities.000 employees in Indonesia. In North America. Its China expansion strategy received a boost when ANZ was granted local incorporation approval in September 2010. money transfers) in Vietnam. cultural and trade linkages with Australia. ANZ anticipates having twenty outlets open by 2013. with three branches and nine ATMs. In Hong Kong. Vietnam and China through a combination of organic growth and strategic acquisition. Japan. primarily in China.Appendix D – International Expansion of Australia’s Largest Banks Australia and New Zealand Bank ANZ has some 1. as well as some business banking and international trade finance.

Great Western Bank. and offers private banking services for expatriates and local professionals. the United States and Asia. in 2010.au Macquarie Group Australian-headquartered Macquarie Group describes itself as a ‘global provider of banking. In China. CBA’s newest international branch was officially opened in Mumbai.600 staff.macquarie. business and corporate banking services to more than 2. NAB recently applied for its first branch licence in Shanghai. The bank has a 20 per cent investment in two Chinese city commercial banks (Qilu Bank and Bank of Hangzhou). NAB’s international strategy has focused more significantly on the New Zealand. Macquarie had more than 14. business banking and agribusiness banking. The Tokyo branch was established in 1986 and conducts wholesale business activities. Asian institutional clients. Organic growth initiatives include the global build-out of the institutional cash equities platform. in August 2010 and is a fully functional commercial banking operation. has more than 900 employees and services 300. In both markets. BNZ has pioneered a number of innovative concepts designed to provide customers with a retail. with approximately 50 per cent of those located offshore. CBA focuses on servicing multinationals from Australia and New Zealand. India. CBA has been in Hong Kong since 1986 and in Singapore since 1982. and $A326 billion of assets under management. advisory. In 2009-10. Macquarie also acquired the cash equities and equity derivatives operations of Sal. UK and US markets. Oppenheim in Europe. › www. and has been a top two ranked manager of Hong Kong initial public offerings since 2008. business and agribusiness banking and insurance services to more than one million customers across New Zealand. mobile banking carts and trailers.000 shareholders. and more than 450. the expansion of debt capital markets activities into the US and Europe.com. Singapore and Japan as well as representative offices in China and India. Fox-Pitt Kelton Cochran. The bank’s UK franchises.au National Australia Bank National Australia Bank (NAB) is a financial services organisation comprising nearly 40. Delaware Investments and Blackmont Capital. Bank of Communications. Tristone Capital.au Australia’s Banking Industry > 65 . advice and services through the major Australian franchise and businesses in the United Kingdom.nab. Caronia Waller. Great Western Bank focuses on retail banking. New concept stores.7 million customers across the UK. NAB has BNZ and BNZ Partners who provide retail.000 people. In New Zealand. experience. more than 1800 branches and service centres. Macquarie has more than one million retail clients and 200.com. and the commencement of physical oil trading in Singapore. Its US company. National Australia Bank in Asia has banking operations in Hong Kong.000 specialist finance and leasing clients worldwide.com. and ‘Out of the Box’ packaged customer solutions have all been introduced.cba. financial. with a network of more than 70 offices in 28 countries and in recent years has consistently generated more than 50 per cent of its operating income from international sources. Also. CBA has had representation in Beijing since 1994 and in 2010 opened its first corporate and institutional branch in Shanghai. NAB provides products. As at 31 March 2010. CBA entered into a life insurance joint venture partnership called BoCommLife with China’s fifth largest bank.In China. New Zealand. and is ranked in the top five North American physical gas marketers. The Group has steadily grown its international activities. investment and funds management services’. primarily in the mid-west.000 customers through 125 branches across seven US States. rather than a traditional banking. › www. Macquarie holds a number of leading market positions in the various markets in which it operates. including Constellation’s downstream natural gas trading business. › www. Macquarie made several North American acquisitions. Macquarie has grown through a mix of organic growth and selective acquisitions. Clydesdale Bank and Yorkshire Bank. It is a top ten institutional equities broker based on global stock coverage. provide retail.

George Bank Limited adding 2. In Australia.George bank now operates as an operating division within the wider multi-branded Westpac Group. St. or with interests in. and providing a gateway for foreign firms and individuals interested in Australia and New Zealand.6 million St. corporate and institutional banking services. where it offers a full suite of private. Westpac merged with St. Westpac’s Asian operations are led out of Singapore. Tonga. corporate. › www. Jakarta and Mumbai. Westpac Retail and Business Banking (WRBB) is responsible for sales.George customers to the group. 16 in Papua New Guinea and smaller number of branches in the Cook Islands. There is an extensive Westpac network throughout the South Pacific with a presence in seven island nations. The bank has twenty branches in Fiji. institutional and government customers either based in.westpac. marketing and customer service for around 5 million consumer and SMEs enterprise customers within Australia under the Westpac and RAMS brands. Westpac has a branch licence in Hong Kong. Westpac Institutional Bank (WIB) delivers a broad range of financial services to commercial. In December 2008. Soloman Islands and Vanuatu.com.au 66 > Australian Trade Commission . Australia and New Zealand. Samoa. Singapore and Shanghai and representative offices in Beijing.Westpac Westpac’s international operations focus on supporting Australian and New Zealand customers in foreign markets.

hdy.au www.freehills.kpmg.com www.bdo.moorestephens.au Australia’s Banking Industry > 67 .com.com www.maddocks.Appendix E – Selected Australian Legal and Accounting/Tax Advisors in Financial Services Legal › Allens Arthur Robinson › Allen & Overy › Baker & McKenzie › Blake Dawson › Clayton Utz › Corrs Chambers Westgarth › DLA Piper › Freehills › Gadens › Gilbert and Tobin › Hall and Wilcox Lawyers › Henry Davis York › Holding Redlich › HWL Ebsworth › Maddocks › Mallesons Stephen Jaques › Middletons › Minter Ellison Lawyers › Norton Rose Accounting/Tax › BDO Kendalls › Deloitte › Ernst & Young › Grant Thornton › HLB Judd Mann › Horwath › KPMG › Moore Stephens › Pitcher Partners › PricewaterhouseCoopers › PKF › WHK Group www.com.minterellison.corrs.au www.com.com.blakedawson.com www.hallandwilcox.pwc.com www.au www.gtlaw.com.com.au www.com.middletons.nortonrose.hwlebsworth.au www.au www.com www.com www.pitcher.dlapiper.au www.au www.com www.aar.mallesons.au www.com.com www.com.pkf.com.com.com www.au www.holdingredlich.com.com.au www.com.whk.au www.hlb.com.au www.deloitte.au www.com www.com www.ey.au www.com www.com www.gadens.allenovery.com.bakermckenzie.grantthornton.claytonutz.com.au www.com.au www.horwath.

Appendix F – Infrastructure Australia’s Reform and Investment Priorities Development Category Early Stage Project Area Transforming our cities Project Name Melton Rail Line Duplication and Electrification (VIC. VIC SA.400 756 2.000 90 105 tbc tbc 3.300m) Sydney’s Future Public Transport Network (NSW.875 7.400 551 1.634 QLD VIC NSW.100 2. Livable.000 tbc 3.300 n/a 2.000 150 47 . n/a) Gold Coast City Rail (SE Qld Mayors.900 20 QLD QLD VIC 788 n/a 400 19.000m) Hobart: A World class.875m) North-West Sydney to CBD Rail Link (AIS: A$7. Waterfront City Adaptable and Secure Water Supplies Competitive International Gateways An Innovative Strategy for Tasmania: Focus on food bowl concept Eyre Peninsula Port Proposals Port of Hastings (incl. WA NSW QLD QLD ACT TAS ACT SA 14. A$2.200 n/a 1. A$1. Peninsule Link rail freight corridor) Port Hedland Inner Harbour – Capacity Enhancements Road and Rail Access and Port Upgrades at Bunbury Pilbara Cities National Freight Network Australian Digital Train Control System (ARA) Mount Isa – Townsville Rail Corridor Upgrade Bruce Highway Corridor Upgrades Transcontinental Rail Link – Mildura to Menindee Total ‘Early Stage’ Capital Expenditure Real Potential Transforming our cities Brisbane Inner City Rail Capacity Upgrade Melbourne Metro Stage 2 Managed Motorway Proposals Integrating Sydney’s Motorway Network Moreton Bay Rail Link Darra-Springfield Rail and Road project Adaptable and Secure Water Supplies A True National Energy Market Water Security Program Tasmanian Water and Sewerage Reform Smart Grid Demonstration Pilot Project Installation of Low Flow Bypasses in the Mount Lofty Ranges 68 > Australian Trade Commission Estimated State Cost (A$m) VIC NSW QLD NSW TAS TAS SA VIC WA WA WA 1.

Australian Rail Track Corporation (ARTC).522 2.000 11. Project National Freight Network Adelaide Rail Freight – Goodwood and Torrens Junction Federal Highway Link to Monaro Highway – Majura Parkway Pacific Highway Corridor Upgrades A National Broadband Network Total ‘Threshold’ Capital Expenditure TOTAL ESTIMATED INFRASTRUCTURE PRIORITY PIPELINE CAPITAL COSTS Abbreviations: Australasian Railways Association (ARA).890 150 16 260 600 4.120 n/a SA NSW n/a 75 Darwin Port Expansion (potential equity injection) NT Moorebank Intermodal Terminal Total ‘Threshold’ Capital Expenditure Ready to Proceed Transforming our cities VIC VIC SA ACT NSW NSW 4.314 340 41. West Net Rail (WNR).000 1. ‘Getting the fundamentals right for Australia’s infrastructure priorities’.900 28 418 220 6. June 2010.566 82.Development Category Project Area Project Name Heywood Interconnector Upgrade Mid-West Energy – Stage 2 Estimated State Cost (A$m) SA WA QLD TAS VIC VIC WA NSW 80 795 2.123 Melbourne Metro Stage 1 Integrated Transit Corridor Development – Route 86 Demonstration.780 4. Source: Infrastructure Australia.000 Competitive International Gateways Abbot Point Multi Purpose Harbour Bell Bay Intermodal Expansion Project Smart Port ICT Melbourne International Freight Terminal Gateway WA – Perth Airport and Freight Access Road Freight Access to Port Botany and Kingsford Smith Airport – M5 East Road Freight Access to Port of QLD 934 Brisbane and Brisbane Airport – Port of Brisbane Motorway Upgrade Road Freight Access to Port of Melbourne – Westlink VIC Freight Access to Port of Adelaide – Northern Connector National Freight Network East West Rail Freight Corridor (ARTC) North South Rail Freight Corridors Eastern Goldfields Railway – Freight Gateway Upgrade (WNR) Advanced Train Management System (ARTC) Western Interstate Freight Terminal Green Triangle Freight Transport Project Total ‘Real Potential’ Capital Expenditure Threshold Transforming our cities South West Rail Link Eastern Busway (Stages 2b and 3) Managed Motorways Proposals – SE Qld Northern Link Road Tunnel Competitive International Gateways Oakajee Port (potential equity injection) NSW QLD QLD QLD WA 500 VIC SA/VIC 2.845 National Broadband Network (NBN) Australia’s Banking Industry > 69 .000 336 tbc 10. 5.400 825 782 1.

Minerals and energy major development projects report. 66.050 44 1.711 65.841 93. with six projects costing in-excess of A$5 billion.9 billion at an advanced stage (projects ‘committed’ or ‘under construction’) of development – the equivalent of 12 per cent of Australian GDP. followed by Queensland (21 per cent) and New South Wales (5 per cent).025 Minerals and Energy Processing No.611 19. Much of this has depended on expanding infrastructure along the supply chain – like railways.990 19.050 380 495 1. Mineral projects Cost (A$m) 2.444 132.765 27. October 2010 Energy projects State New South Wales Victoria Queensland Western Australia South Australia Tasmania Northern Territory Australia No. there are 72 projects with forecast capital expenditure of A$132.959 2.343 5.66 Currently.797 2. ports and pipelines – to transport increased mining volumes to market.444 92. Committed projects.922 0 0 0 11.715 45 3. Western Australia represents 70 per cent of these projects.890 No. Minerals and energy Major development projects – October 2010 There are currently sixteen projects committed or under construction that exceed A$1 billion in capital cost. Cost (A$m) 1.9 billion in the five years to October 2010. Cost (A$m) 3.563 Infrastructure Projects No.934 7 2 6 7 1 1 2 26 2 1 5 15 2 0 0 25 4 1 6 4 0 0 0 15 0 1 3 1 0 1 0 6 13 5 20 27 3 2 2 72 Sources: ABARE. iron ore (13 per cent) and coal (4 per cent). 70 > Australian Trade Commission .194 2. Cost (A$m) 0 65 2. These projects are spread across commodities and states.447 138 345 1. October 2010. Total Cost (A$m) 6.Appendix G – Capital Expenditure in Australia’s Mining Sector International demand for Australian natural resources has grown significantly over the past decade and the local industry has responded through increased production capacity.444 0 150 0 5. although concentrated by value in petroleum (66 per cent).456 No. Large capital projects in infrastructure and production facilities can be seen in the doubling of annual capital expenditure from A$10 billion to A$19. ABARE-BRS.237 242 0 0 23.

Total capital expenditure as reported by the company in current dollars.2b (A$5. WA 150 km NW of Dampier Carnarvon Basin.pdf Australia’s Banking Industry > 71 .65b (A$6.gov.1 billion Port Hedland projects.0 billion in committed projects.8b) Iron Ore 1. Includes cost of development.3 billion Oakajee Port Rail and the A$2. 2.au/data/warehouse/pe_abarebrs99001758/MEP_Oct2010_report.3b) incl. infrastructure) $5.1b (inc site works for train 2) US$5.A. The fifteen largest of these are estimated to cost in-excess of A$2 billion.brs. Minerals and energy major development projects. there are A$248. ‘Minerals and energy major development projects report – October 2010’ http://adl. Further information can be found at ABARE-BRS. WA Sectors Petroleum Petroleum Petroleum Iron Ore Petroleum Queensland Curtis LNG project BG Group Pluto (train 1) Rapid Growth Project 5 (RGP5) NWS North Rankin B Woodside Energy BHP Billiton Woodside Energy/ BHP Billiton/BP/Chevron/ Shell/Japan Australia LNG CITIC Pacific Mining Sino Iron Project 2011 US$5. The largest of the less advanced infrastructure projects include the A$4. Principal operating companies. and a further 31 valued at A$27.1b (A$5.4 billion port expansion in Karratha.8 billion in less advanced projects. WA Cape Preston. WA Gladstone. rail projects and gas pipelines.1 billion Connyella to Abbot Point rail expansion in Queensland.0 billion of less advanced projects (undergoing feasibility or pre-feasibility). WA Pilbara.7b) Project Gorgon LNG Company 1 Chevron / Shell / ExxonMobil Location Barrow Island. Qld Carnarvon Basin/ Burrup Peninsula. Sources: ABARE-BRS. plant and equipment. The largest committed projects include the Cape Lambert A$3.7b) (BG Group’s Share) $12. Committed infrastructure projects include iron ore and coal ports. The largest four projects are in the energy sector. W. and the A$1. Infrastructure projects directly associated with the Minerals and Energy sector currently stand at 15 with an estimated cost of A$11. October 2010 Further.Capital Expenditure committed or under construction by inidvidual projects over A$5 billion Expected Startup 2015 2014 2011 2011 2013 Capital Expenditure2 $43b US$15b (A$16.

Bank of Queensland. The use of debit cards has also grown significantly in recent years. St. Through the Payment Systems (Regulation) Act 1998 and the Payment Systems and Netting Act 1998.au/payments-system/about.au/statistics/tables/xls/c08hist. http://www. RBA website. National Australia Bank. equivalent to 20 per cent of GDP. monthly withdraws from ATMs averaged A$12. Payments System Access Points The sophistication and competitive nature of Australia’s payments system is reflected in the changing nature of access points to the system. Wide Bay Australia Ltd and 56 credit unions. http://www.434.68 While bank branches have been steadily increasing since 2001. with ATM numbers tripling to 28.gov. GE Capital Finance Australia. non-bank branches have shown a slow decline over the past few years. ATM and EFTPOS terminal numbers grew significantly over the decade to June 2010.764 and EFTPOS terminals more than doubling to 712.xls 72 > Australian Trade Commission .html 72. policies.rba. Heritage Building Society. Bank@Post. the Reserve Bank has a clear mandate to oversee the operation of the payments system. Maitland Mutual Building Society.rba. RAMS Home Loans.6 billion. The Australian Payments Clearing Association (APCA) is the Australian payments industry’s principal self-regulatory body. HSBC Bank Australia.gov. B&E Ltd.au/payments-system/about.au/statistics/tables/xls/c08hist.gov. Non-cash Payments Non-cash payments account for most of the value of payments in the Australian economy.gov. RBA website http://www.rba.gov. Citibank.au/statistics/tables/xls/c08hist.167. RBA website. As at June 2010.xls 68. which are processed through Australia’s real-time gross settlement (RTGS) system. Australia is a very sophisticated market where ICT companies can successfully develop solutions with global applicability.544 branches while non-bank branches numbered 1. RBA website.67 ATMs and EFTPOS terminals. http://www. It is estimated that approximately A$22071 billion of non-cash payments are made each business day. BankWest. http://www.rba. there were 32. 67.rba. It is the primary vehicle for payments industry collaboration with a mandate to manage and develop regulations. Commonwealth Bank. e-health.au/statistics/tables/xls/c05hist. The country is also the source of a number of distinctive technologies – especially in the areas of e-finance.70 or approximately A$575 per person. and e-government. In 2009. banks operated out of 5. Approximately three-quarters of the value of non-cash transactions are high-value business transactions.1 million bank accounts that could be accessed by a debit card. Automated Teller Machines (ATMs) have facilitated the use of cash by making it more readily available. George Bank.html 71.rba. As at 31 August 2010. member institutions comprised Adelaide Bank.69 Cash Payments Cash remains the most important payment instrument for small retail transactions and accounts for the highest volume of transactions.xls 69. Regulation The Payments System Board (PSB) of the Reserve Bank of Australia oversees the payments system and is responsible for promoting the safety and efficiency of the payments system. Access to the payments system comes from bank and non-bank (credit union and building society) branches. Members Equity. Bendigo Bank. Bank@Post’ (formerly giroPost) provides a limited range of financial services at certain Australia Post offices on behalf of member financial institutions. http://www. ING Direct. and standards governing payments clearing and settlement within Australia. In June 2010. procedures. and these cards processed some 197 million transactions (purchases and cash-outs) during the month with a total value of A$13 billion.gov. RBA website. IMB Ltd.Appendix H – Transaction Services – Payments System Australia’s payments system represents a unique model of combined government and industry self-regulation.xls 70.72 Australia was ranked one of the Top Ten in the world in the Economic Intelligence Unit’s Digital Economy Rankings 2010.

APCA. Scheme credit and debit cards (MasterCard and Visa) and BPAY are cleared independent of APCA.com.au. ATMs. Most mobile payments are for phone-related products (such as ringtones) or are internet banking payments initiated on a smartphone. the Payments System Board announced a strategic review of innovation in the Australian payments system. covering approximately 90 per cent of the consumer banking market. and public transport. The roadmap focuses on cheque and direct entry systems and sets out a series of industry initiatives. while retail payments are settled as a batch on a deferred net settlement basis. Future Trends In December 2008. BPAY was a world first single bill payment system that was adopted across the banking sector. Touch and Go Touch and Go technology (MasterCard Paypass and Visa Paywave) has recently appeared in the Australian market.Payment Settlements Arrangements for clearing most payment instruments – cheques. It is limited to transactions with a value below $100. There are more than 18. Tyro provides an internet based EFTPOS solution for credit. it allows for the rapid payment of goods and services by simply touching the card against the terminal. EFTPOS and high-value payments – are coordinated by the Australian Payments Clearing Association (APCA). telephone cards.73 In May 2010. Such cards come with various characteristics and degrees of sophistication and are being used in Australia primarily in the form of gift cards.bpay. New Technologies Mobile Banking/Payments Mobile payments (which include SMS-based stored value services. The objective is to identify areas in which innovation in the Australian payments system could be improved through more effective co-operation between stakeholders and regulators. Final settlement of obligations between payments providers is undertaken by entries to the providers Exchange Settlement (ES) accounts at the Reserve Bank. debit and gift card transactions on behalf of Australian merchants.000 biller codes that accept BPAY and each month 25. Stored Value Cards Stored value cards (also known as rechargeable stored value. Low Value Payments: An Australian Roadmap. APCA released its vision for the evolution of Australia’s electronic payments systems. belong to the scheme. EFTPOS and ATMs. including new connectivity of applications to international standards and standard messaging. building societies and credit unions. smart cards or electronic purses) are cards which store ‘rechargeable’ value. The report was based on extensive consultations with industry and lays out a high level vision for low value payments in Australia for 2018. the Commonwealth Bank has reported that 25 per cent of eligible transactions at its 15. A recent entrant to the Electronic Funds Transfer at Point of Sales (EFTPOS) system is Tyro. Its objectives were to provide a convenient and secure way for consumers to pay bills and a more efficient collection service for billers and financial institutions. Australia’s Banking Industry > 73 . 73. direct entry payments. While the lack of verification has created concerns about security. Large-value payments are settled one-by-one on a real-time gross settlement (RTGS) basis. More than 170 Australian financial institutions (Authorised Deposit-taking institutions under the Banking Act). More information on BPAY is available at www. entitled ‘Low Value Payments: An Australian Roadmap’. which is a private company owned by banks. BPAY Launched in 1997. Take-up of these cards and other SMART card type applications in Australia has been less than in other countries such as the United States. direct debit and direct credit payments. APCA administers five payments clearing systems covering cheques. A special chip in the debit card is detected by the terminal.000 terminals are now processed using this technology. The Board anticipates finalising its conclusions by the end of 2011. December 2008.7 million bills worth A$19. high value and bulk cash. top ups of mobile accounts and phone bill charges) are at an early stage of adoption in Australia.2 billion are paid using BPAY. and the COIN Infrastructure System.