The australian banking sector reforms: Progress and challenges

Abstract

This paper gives an overview of the Australian banking sector; it highlights the reforms since the 1970s; it tracks the growth of the banking sector in response to the reforms implemented over the past five decades; and finally, it highlights the challenges facing the Australian banking sector. The country’s banking sector consists of more than 60 commercial banks, with the Reserve Bank of Australia, the country’s central bank, at the apex. Since the 1980s, the Australian government has implemented a number of banking sector reforms in order to safeguard and improve the banking sector. The response to these reforms by the banking sector has been varied. As a result of these reforms, there has been an increase in the number of banks and a decrease in the number of building societies and credit unions. There has also been an improvement in the central bank’s oversight of the financial institutions, and an enforcement of the banks’ capital-adequacy requirements. Currently, Australia has one of the most developed banking systems in the world. The country has enjoyed a substantial bank-based financial sector development over the years, and its institutional framework has also grown stronger. However, like any other country’s financial system, the Australian banking system still faces wide-ranging challenges, such as bank concentration and exposure.