Business banking refers to any form of financial dealings with a commercial institution those grands loans business entities, credit and saving accounts, and checking accounts for companies that exclude individuals. Another term for business banking is commercial banking.
The commercial banking defines the division of a bank that only deals with businesses. In comparison, a bank that details with individuals is called retail banking. Similarly, a bank that trades in capital markets is called in an investment bank. In Australia, the Banking Act of 1959 did not provide a clear a definition of the word bank (Wentworth, 2003). The inclusion of the several institutions that play the role of banks meant that the definition of banks had to be expanded. The concept of the “Authorized Deposit Taking Institutions (ADI) was introduced in 1988. The section 5 of the Banking Act defines ADI as a corporate institution authorized by the Australian Prudential Regulation Authority (APRA). Under section of 9 the Banking Act to carry on the business of Banking (Tyree, 2007).
After the amendment of the Banking Act of 1959, the role of Banks in Australian payment systems was omitted. This regulation hindered business banks from directly engaging for collection of payment checks, direct credit cards, debit and credit cards as well as issuance of high value payments. However, by 2003, the acquiring and issuance of credit cards by credit cards companies such as Mastercards and Visa became included in banking business. Before this amendment, there existed a palpable confusion in the ways in which “banking business” was carried out especially in the lack of a policy framework for “purchased payment facilities” (Putnis, 2010).
The Wallis recommendations argued for a change in the supervisory role of banking and payments. The recommendation split the checks on banking business by splitting the responsibility to the Reserve Bank of Australia and the Australian Prudential Regulation Authority.
Currently, this endeavor caused nothing but chaos. While the APRA controls the regulations and licensing of carrying out any banking business, the RBA has monopoly on the payment systems. The lack of clarity has caused an overlap in the system. It is not hard for one to understand that the banking and payments are inseparable. Banks have faithfully played the role of shepherds of financial dealings such as third party payments and safeguarding of people’s savings (Beatly & Tyree, 2000).
In the Australian business banking today, ADI’s almost have the equal status of business banks. They can take payments and save money for people. The reform was initiated in 1980s when technology permitted credit unions to infiltrate the payment systems. In addition to credit unions, ADI’s can now provide payments even for other non ADI’s such as stored value cards, digital cash, and other payment systems. In 1988, the Australian Payment Systems Regulations Act of 1988 tried to put measures to with the situation of what is called “purchased payment facility” (Banking Amendment Regulations 2000 (No 1).
The new definition of banking business aims to expand its original mandate incorporate the new requirements. According to RBA/APRA, the aim of the new venture is to get rid of the “dual regulatory structure of the business banking system. Accordingly, this format aims to eliminate the occurrence where the APRA plays the supervisory of ADIS that are double as HSVS. At the same time,HSVS have a pardon from section 9(3). Under this act, the provision of PPF defines banking business only for some aspects of PPF (Banking Amendment Regulations 2000 (No 1)
Australia has one of the most sophisticated and stable banking industry. The banking system is Australia gains its stability from the well regulation and a competitive nature that allows free entry of new players. In the Australian economy, the financial sector is arguably the biggest contributor to the country’s national output. In the year 2010, the country added a gross value of over 11 percent of its GDP equating to about A$ 135 billion. In the same year, Australia ranked fifth as the world ‘s leading financial market according to the World Economic Forum and Financial Development Report. The banking industry in Australia provides full ranges of banking and financial services (Putnis, 2000).
Four major banking institutions dominate the Banking industry in Australia. These banking groups include Australia and New Zealand Banking Group Limited, the Common Wealth of Australia, National Bank Limited and Westpac Banking Corporation. In the recent years, the market for these corporations has increased tremendously. For example, the Commonwealth Bank of Australia has bought a smaller bank called the Bank of Western Australia since October 2008. The bank also bought the Westpac Banking Corporation as well as the George Bank Limited in December 2008 ( Wentworth, 2003).
The Banking Market in Australia includes significant concentrations of foreign banks, regional banks, investment banks and a group of regional and non- banking financial institutions that offer banking services. Such institutions specialize on activities such as credit unions, building societies, and corporative unions. By April 2010, there were approximately 185 authorized deposit taking institutions in Australia. The Australian Prudential Regulation Authority licenses the ADI’s like previously mentioned. They are mandated to carry on the banking business in Australia. There are approximately twenty-one Australian ADI’s, 34 foreign ADI’s and 11 building societies, 108 credit unions, 3 non-operating holding companies and eight other financial institutions (Tyree, 1997).
ven though the dominant banks still control the Australian financial market, there is also the increasing role of foreign banks in providing competition for the already established local firms. The non-banking institutions also pose a great danger to the stability of banking because of their ever-increasing roles in the financial market. Today, the Australian payment structure is in the process of change that makes the completion even more intense and cut throat. While most Australian firms favor technology, the changes that come with technology have posed challenges in the way the financial market is traded. There is debate on how to formulate payments that go through credit cards, plastic money and others (Australia Banking Industry (2010).
Banking Rules and Regulations in Australia
In general, the regulation of the Australian banking and finance system is a role designated to the Reserve Bank of Australia and the Australian Securities and Investment Commission (ASIC). The 1959 Banking Act stipulated these changes making the central bank responsible for monetary policy. Payment Systems Board and the Reserve Bank Board supervise and implements the policies stipulated by the Reserve Bank of Australia. Still, the Reserve Bank of Australia has no supervisory role over the prudential’s and ADIs and other non-banking institutions. Another role of RBA is the exchange control; however, this role is often sidestepped because of the lack of need of approval if the case involves foreign exchange transactions.
The Australian Prudential Regulation Authority act 1988 is responsible for the licensing and prudential supervision of all ADi’s and NOHCs authorized by APRA. The APRA is also mandated with a supervisory role over insurance companies basing on the Banking Act and the Life Insurance Act of 1995. In addition to these roles, APRA ensures that Australian financial institutions are in line with the commonwealth laws for purposes of regulating standards. In Australia, the APRA is subjected to checks by the Australian government’s directions. However, the government ensures that APRA is free from government interference and its operations and separate from the main line of government interventions. For example, the government limits the minister of Finance from giving directions to APRA about the goings in any form of a case involving the two entities. ASIC, an organization that was established by the Australian Securities and Investment Act of 2001 is in charge of monitoring and ensuring market honesty and integrity, consumer welfare and protection as well as licensing (Banking Amendment Regulations 2000 (No 1).
Bank Management is Australia requires that the bank carrying out business, must have at least a minimum of three directors. Out of the three directors, one director must be permanently based in Australia. The Corporations Act do not require a statutory requirement for any other organ of the organization apart from the directors. In general, the sole responsibility of management remains at board level. The responsibility of the established board is often subjects of internal concerns and is not discussed by out in the public.
The Australian Securities and Investment Commission Act of 2001 outline the rules governing the functions of lending banks. The ASIC act 2001 gives power of regulation of banks thus protecting the consumers from unscrupulous aspects of life. When faced with issues relating to consumer protection in the financial sector, the ASIC is the beckon of hope for consumers. Similarly, in Australia, credit is provided by banks in Australia. The provision of credit is regulated under the consumer credit code.
It is common that every business has to deal with situations those results into constraints with customers. However, the manner in which the company responds to customers is key to the success of the organization. The customer is the voter for the organization, and customer satisfaction should be the primary goal of the organization. Successful companies do not satisfy customers. They work hard to please them.
Superior customer values mean continually creating a business experience that exceeds the ordinary expectations. Value is the strategic driver that most multinational corporations utilize to differentiate themselves from the rest in view of customers. In the abstract form, values mean the excellence usually based on the desirability or usefulness. Value driven marketing strategy help organizations in several areas. Customer value helps by reducing constraints, creating teamwork and developing cohesion at the work place. Banks in Australia can improve them customer relations if it follows those mechanisms ( Putnis, 2000).
Barrier to effective customer engagement is “organizational and conceptual.” A change in the organization of farm from the traditional methods of customer engagement to more comprehensive marketing system that includes all stakeholders in the product will go a substantial way in stimulating success. A comprehensive marketing approach that is interactive and focuses on equality will be beneficial to a company in the end. High performing teams have not developed by accident. Instead, they have developed by the ability to change by having stable and consistent team building processes that assist in evaluating the team context, team composition, and team competencies. A company must aspire to create high performance by following the above-mentioned guidelines (Tyree, 1999).
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Tyree, A and Andrea Beatty. The Law of Payment Systems. Butterworths, Sydney, June 2000. ISBN 0 409 31701 2
Consultant, Mallesons Stephen Jaques, Sydney; formerly Landerer Professor of Information Technology and Law, University of Sydney.
Banking Amendment Regulations 2000 (No 1)
Putnis, Jan, ( 2010). The Banking Regulation Review, Law Business Research.
Wentworth, Elizabeth.( 2003) Essential Banking Law and Practice, London, UK.