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Banking & Finance

Banking

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Banks in Australia

The Australian banking system is highly developed, well-capitalised and amongst the most highly rated in the world. Commercial banks offer a wide range of services, are free to engage in most forms of financial services and provide the majority of short- and medium-term financing in the Australian market.

The banking sector is highly concentrated with four dominant national banking groups in Australia.  These are the Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA or just CommBank), National Australia Bank (NAB) and Westpac Banking Corporation (WBC or just Westpac).  These banks hold around 80% of bank assets and around 90% of mortgage loans.  The Australian government operates a Four Pillars Policy that does not allow any mergers between the top four banks.  A number of smaller and regional banks also operate in Australia and, of these, several are owned by the big four but operated independently (e.g. St. George by Westpac, BankWest by CommBank).

Foreign banks operate in Australia through branches and Australian-incorporated foreign bank subsidiaries. Foreign banks may also operate as a representative office in Australia for liaison purposes with restricted activities.   List of banks operating in Australia

Banks are regulated by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).

International Transfers & Payments

The Australian dollar is freely convertible with exchange rates determined independently by the market.  Banks and financial institutions (and other entities) must comply with transaction reporting and anti-money laundering/counter terrorism legislation.  This requires reporting of certain transactions and verification of persons who are signatories to accounts, and also prohibits accounts being opened or operated in a false name.  Exchange controls.

Electronic funds transfers and credit card payments are increasingly used for international transactions.  Bills of exchange and promissory notes are not widely used.  The majority of banks operating in Australia are connected to the SWIFT electronic network.  SWIFT bank transfers are the most commonly used payment method for international transactions.

Transaction Banking

Whilst technically conceivable to not have a local bank account for non-trading companies, trading businesses must have a local account for ATO tax purposes (for both payment and/or receipt of quarterly BAS payments/refunds and annual tax accounts).

Australian banks offer a range of transaction banking services. Common transaction banking products include business accounts (accessible by cheque, automated teller machine (ATM), EFTPOS, phone or internet banking), BPAY (an electronic bill payment system), the international SWIFT Payment Delivery System, overdraft and other limit facilities, cheque book and payroll processing.

When opening a bank account, banks require a range of documentation which may include:

  • Personal identification requirements for the signatories to the account (in accordance with Government legislation; the "100-Point Check").  These requirements also apply to all account users.
  • Details of the business name and address and supporting documentation.
  • Australian Business Number (ABN), Australian Company Number (ACN) or Australian Registered Business Number (ARBN).
  • Names and details of directors and account signatories & supporting documentation (which must usually be certified if the directors or signatories cannot attend the branch for account opening).
  • Certificate of incorporation (from ASIC in Australia or from the relevant authority in other countries).
  • Tax File Number (TFN) – not technically required, but banks are obliged by law to deduct tax from interest earned where a TFN/ABN or TFN/ABN exemption has not been quoted on an account or where interest is credited to an account of a non-resident.

Most banks offer direct credit (or Direct Entry, though it is referred to by different names at different banks) facilities to easily pay other Australian bank accounts online; many business transactions are completed this way, although cheques are still used by some traditionalists.

EFTPOS (or Electronic Funds Transfer at Point Of Sale) is an electronic payment system involving electronic funds transfers based on the use of payment cards, such as debit or credit cards, at payment terminals located at points of sale.

Finally, BPAY is a distinctly Australian innovation, starting in November 1997 as a secure way to pay bills by phone but quickly evolved to also offer bill payments over the Internet through a financial institution’s online banking portal; BPAY is offered on over 44,000 bills and now processes more than 30 million bills or $24 billion monthly.

Other Banking & Financial Services

Australian and global investment banks also operate in Australia. The Australian Financial Markets Association represents participants of Australia's wholesale financial markets.

Compared to other markets, the venture capital and private equity sector is relatively small.  The Australian Private Equity & Venture Capital Association (AVCAL) is Australia's national association which represents the Australian venture capital industry.

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Exchange Controls

The Australian dollar is freely convertible with exchange rates determined independently by the market.

Inward investment is not subject to exchange controls, however Foreign Investment Review Board (FIRB) rules apply for investments and approvals may be required.

Outward exchange controls on capital repatriations are not restricted but are subject to transaction reporting - required under the Financial Transaction Reports Act - to the Australian Transaction Report and Analysis Centre (AUSTRAC). AUSTRAC is Australia's anti-money laundering and counter-terrorism financing regulatory and specialist financial intelligence unit. Financial institutions and dealers must report significant cash transactions of A$10,000 or international fund transfers to and from Australia unless exempted.

The Anti-Money Laundering and Counter-Terrorism Act (AML/CFF) places obligations on reporting entities that provide designated services such as the financial sector, dealers and other entities and brings Australia into line with international best practice to deter money laundering and financing of terrorism.

Financial institutions must also verify the identity of persons who are signatories to accounts and also prevent accounts being opened or operated in a false name.

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Exchange Rates

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The Australian Dollar, AUD, A$

Since its float in December 1983, the Australian dollar has become the fifth most traded currency globally. The Australian dollar has historically been considered a commodity-based currency with strong exposure to Asian economies and has tended to trade inversely to many major currencies. In addition to global growth and resultant commodity demand, the Australian dollar is also influenced by interest rate differentials, global share prices and international geo-political issues and, as such, has generally experienced volatility.

The Australian dollar receives relatively low levels of intervention by Australia's central bank, the Reserve Bank, and benefits from general Australian economic and political stability.

Since floating, the Australian dollar reached a low of 47.75 US cents in April 2001. In October 2010, the Australian dollar reached parity with the US dollar for the first time since free floating and in July 2011 hit a high of $1.1080 against the US dollar.

Current Exchange Rates:  Reserve Bank of Australia Exchange Rates

There are a range of banks, FX providers and online FX Services offering competitive products, services and strategies to execute FX and manage risk. These include spot and forward foreign exchange transactions, foreign currency accounts and call and put options.


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