Answer To: ECON405 Banking and Finance – Trimester 3, 2020 Assignment 1 – Essay Due date: Sunday 6th December,...
Hartirath answered on Nov 23 2021
Running Head: RBA
RBA
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Explain the roles and responsibilities of these three regulators. 3
Discuss briefly what are the recent changes/updates of those roles and responsibilities with respect to the current outbreak of COVID-19 6
Provide Liquidity to the Financial System 6
Provide Liquidity to the Government Bond Market 7
(c) Using a flowchart, discuss the process of monetary policy transmission and economic activity across the financial and real sectors of the economy resulting from the Reserve Bank of Australia’s (RBA) recent monetary policy changes (lower the cash rate from 0.50 percent to 0.25 percent) 8
Lower the Cash Rate Target to 0.1 Per cent 8
References 11
Explain the roles and responsibilities of these three regulators.
The Reserve Bank of Australia (RBA) is answerable for monetary policy and the constancy of overall economy. RBA has no compulsion to protect the bank depositor’s interests and other bank creditors. Rather, its mission is to address risks to financial activity as well as financial stability that can spill over into investor and consumer confidence. In event of such a threat, the RBA retain the discretionary function of the "lender of previous resort" for crisis liquidity assistance (Cheremukhin et al., 2016). If providing such assistance, RBA's preference is to make finances available throughout the market throughout domestic market operation. However, in certain situations, the RBA is ready to lend to financial institutions facing liquidity issues. The institution must be under the supervision of APRA. Should be solvent and failure to pay must intimidate the constancy of economy as a whole. Judgment of APRA's on fundamental health of poor economic institutions is critical to the RBA's support.
Under the auspices of its Payment Systems Commission, the RBA has the power to promote the security, efficiency and competition of APS and is backed by strong regulatory powers. Such as, if an RBA evaluates that there is room for access to a specific payment system, and to improve its security or efficiency, it can "assign" that system as regulated (Daly et al., 2014). It may then impose access on the system or set standards of efficiency and safety for the public good. RBA is answerable for operating an exchange settlement account for applicants in the payment system.
The RBA published a draft economic stability standard for clearing as well as facilities of settlement in November 2002 and the final standard in May 2003.
The individual council members' annual reports and internet site contain details about their activities and responsibilities.
The Australian Financial Regulatory Framework, the key element of which was introduced on July 1, 1998 in reply to the suggestions of the Financial System Survey (Wallis Commission), has three particular functional responsibilities (Maddock, 2013). It is composed of institutions.
• Australian Prudential Regulation Authority responsible for soundness supervision.
• Investment Commission and Australian Securities. Answerable for the market integrity or customer protection of the entire economy.
• The Reserve Bank of Australia (RBA) is responsible for monetary policy, overall financial system stability, and payment system regulation.
Australia's Health Regulatory Authority is an integrated health regulator answerable for deposit handling agencies (banks, credit unions and building, credit unions), or life insurance, friendly societies, non-life insurance and aging. APRA is responsible for developing a soundness policy that balances financial security and efficiency, competitiveness, competition, as well as competitive neutrality. Depositors are synchronized by the APRA under only licensing system or are all subject to the similar "Depositor Protection" supplies of Banking Act of 1959. A license that creates soundness standards or gives enforceable instructions, appoints an investigator moreover statutory executive to a licensed deposit handling agency (ADI) facing difficulties, or controls the agency itself. If the difficulties turn out to be unmanageable, APRA can also apply to court to settle the ADI.
Under "Depositor Protection" clause of Banking Act of 1959, depositor’s initally charge ADI's assets at liquidation (Wilson, 2007). To support the interests of depositors, all ADIs must hold their Australian assets at least as much as their Australian deposit liabilities. However, these arrangements do not guarantee the depositor's funds in any way and the depositor cannot rely on APRA or the government. APRA is a problematic entity, as is the case with ADI, where financial weaknesses in life insurers, non-life insurers, friendly societies and old-age pension funds can affect adversely the interests of policyholders and members. In the case of aging, the Minister of Revenue and Assistant Minister of Finance may indemnify members of the Fund for losses because of theft...