1301.0 - Year Book Australia, 2012
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/05/2012
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Statistics contained in the Year Book are the most recent available at the time of preparation. In many cases, the ABS website and the websites of other organisations provide access to more recent data. Each Year Book table or graph and the bibliography at the end of each chapter provides hyperlinks to the most up to date data release where available.
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FINANCIAL ENTERPRISES
Financial enterprises are institutions that engage in acquiring financial assets and incurring liabilities, for example, by taking deposits, borrowing and lending, providing superannuation, supplying all types of insurance cover, leasing, and investing in financial assets.
For national accounting purposes, financial enterprises are grouped into the following sectors:
Table 27.2 shows the relative size of these sectors in terms of their financial assets. This table has been compiled on a consolidated basis, that is, financial claims between institutions in the same grouping have been eliminated. The total is also consolidated, that is, financial claims between the groupings have been eliminated. For this reason, and because there are a number of less significant adjustments made for national accounting purposes, the statistics in the summary table will differ from those presented later in this chapter and published elsewhere.
BANKS
Between 1940 and 1959, central banking business was the responsibility of the Commonwealth Bank. The Reserve Bank Act 1959 (Cwlth) established the Reserve Bank of Australia (RBA) as the central bank, and from 1959 to 1998, the Reserve Bank was responsible for the supervision of commercial banks. From 1 July 1998, APRA assumed responsibility for bank supervision, while the Reserve Bank retained responsibility for monetary policy and the maintenance of financial stability, including stability of the payments system. The RBA also has responsibility for issuing banknote currency, holding Australia's international reserves, holding reserve deposits and providing banking services to the Australian Government. The liabilities and financial assets of the RBA are set out in table 27.3.
LIABILITIES
Banks are the largest deposit-taking and financial institutions in Australia. At the end of June 2010, there were 55 banks operating in Australia. All are authorised to operate by the Banking Act 1959 (Cwlth). The four major banks account for nearly three-quarters of the total assets of all banks and provide wide spread banking services and an extensive retail branch network. The remaining banks provide similar banking services through limited branch networks, often located in particular regions. At 30 June 2011, banking services were provided at 30,154 Automatic Teller Machines (ATMs) throughout Australia. The liabilities and financial assets of the banks operating in Australia are shown in table 27.4.
LIABILITIES
OTHER DEPOSITORY CORPORATIONS
Other depository corporations include building societies, credit co-operatives, money market corporations and other registered financial corporations.
The Financial Corporations Act 1974 (Cwlth) ceased on 1 July 2002. Corporations previously subject to the Act were then required to report statistical data to APRA as Registered Financial Corporations. From 31 March 2003, following changes to the Financial Sector (Collection of Data) Act 2001 (Cwlth), only the following categories of other depository corporations are required to report to APRA:
Table 27.5 shows the total assets of each category of non-bank deposit-taking institution.
PENSION FUNDS
Pension funds have been established to provide retirement benefits for their members, who make contributions during their employment and receive the benefits of this form of saving in retirement. There are two basic types of contribution – employer contributions in the form of the superannuation guarantee and voluntary member contributions. In order to receive concessional taxation treatment, a pension fund must elect to be regulated under the Superannuation Industry (Supervision) Act 1993 (Cwlth) (SIS Act).
Pension funds are supervised by either APRA or the ATO. Some public sector funds are exempt from direct APRA supervision, but are required to report to APRA under an agreement between the Australian Government and each of the state and territory governments.
The largest group of pension funds, in terms of number and value, is self-managed superannuation funds. From 1 July 2000, the ATO assumed responsibility for their regulation. Self-managed superannuation funds have fewer than five members, generally all of whom are trustees, or directors of a company that is a trustee.
Corporate funds are established for the benefit of employees of a particular entity or a group of related entities, with joint member and employer control. Industry funds generally have closed memberships restricted to the employees of a particular industry and are established under an agreement between the parties to an industrial award.
Public sector funds provide benefits for government employees, or are schemes established by a Commonwealth, state or territory law. Retail funds offer superannuation products to the public on a commercial basis. All eligible roll-over funds and multi-member approved deposit funds are also classified as retail funds. Superannuation funds regulated by APRA with fewer than five members and an Extended Public Offer Entity Licensee are known as small APRA funds.
In addition to separately constituted funds, the SIS Act also provides for special accounts operated by financial institutions earmarked for superannuation contributions, known as Retirement Savings Accounts, that also qualify for concessional taxation and are under the supervision of APRA. The liabilities represented by these accounts are liabilities of the institutions concerned and are included with the relevant institution in this chapter (e.g. retirement savings accounts operated by banks are included in bank deposits in table 27.4).
The number of pension funds is shown in table 27.6. The assets of pension funds are shown in table 27.7. The financial assets in the table do not separately identify any provision for the pension liabilities of governments to public sector employees in respect of unfunded retirement benefits. These pension liabilities are recorded in the government accounts. At 30 June 2011, the ABS estimate for claims by households on governments for these outstanding liabilities was $262.6 billion.
LIABILITIES
Source: Australian National Accounts: Financial Accounts (5232.0).
LIFE INSURANCE CORPORATIONS
Life insurance corporations offer termination insurance and investment policies. Termination insurance includes the payment of a sum of money on the death or permanent disability of the insured. Investment products include annuities and superannuation plans. The life insurance industry in Australia consists of 31 direct insurers, including six reinsurers. As with the banking industry, the life insurance industry is dominated by a few very large companies, which hold a majority of the industry's assets.
Life insurance companies are supervised by APRA under the Life Insurance Act 1995 (Cwlth). APRA also regulates 14 friendly societies, which offer services similar to life insurance corporations.
Table 27.8 shows the financial assets and liabilities arising from both policyholder and shareholder investment in life insurance corporations and friendly societies.
LIABILITIES
NON-LIFE INSURANCE CORPORATIONS
This sector includes all corporations that provide insurance other than life insurance, including reinsurance services provided to other insurance corporations. Included in general insurance is house, motor vehicle (domestic and commercial), fire, accident, employer liability, health, travel, marine and aviation, mortgage and consumer credit insurers.
Private health insurers are regulated by the Private Health Insurance Administration Council under the Private Health Insurance Act 2007 (Cwlth). At 30 June 2011, there were 38 private health insurers, including health benefit funds of friendly societies. Other private insurers are supervised by APRA under the Insurance Act 1973 (Cwlth). At 30 June 2010, there were 104 insurers authorised to conduct new or renewal general insurance supervised by APRA. There are 10 separately constituted public sector insurance corporations with significant assets.
Table 27.9 shows the financial assets and liabilities of non-life insurance corporations.
LIABILITIES
FINANCIAL INVESTMENT FUNDS
Included under financial investment funds are retail and wholesale (master) trusts, common funds and listed investment companies.
Retail trusts are collective investment funds open to the Australian public. Their operations are governed by a trust deed, which is administered by a management company. Under the Managed Investments Act 1997 (Cwlth), the management company is the single responsible entity for both investment strategy and custodial arrangements. The latter previously had been the responsibility of a trustee. Retail trusts raise funds by issuing shares or units to the public, either via a prospectus or a distribution channel such as a platform (an Internet sale tool, operated by financial services firms that can be thought of as an investment product menu). These trusts allow their unit holders to dispose of their units relatively quickly. They may sell them back to the manager if the trust is unlisted, or sell them on the Australian Stock Exchange (ASX) if the trust is listed. While these trusts are not subject to supervision by APRA or registered under the Financial Sector (Collection of Data) Act 2001 (Cwlth), they are subject to the provisions of corporations law, which includes having their prospectus registered with the Australian Securities and Investments Commission (ASIC).
Wholesale (master) trusts included as financial investment funds are open to institutional investors, such as life insurance corporations, retail trusts, corporate clients, and high net worth individuals. They have high entry levels (e.g. $500,000 or above), although they are becoming increasingly open to the general public via distribution channels such as platforms. Wholesale trusts may issue a prospectus, but more commonly issue an information memorandum.
Common funds are set up by trustee companies and are governed by state and territory Trustee Acts. They allow the trustee companies to combine depositors' funds and other funds held in trust in an investment pool. They are categorised according to the main types of assets in the pool, for example, cash funds or equity funds.
Listed investment companies are similar to equity trusts or funds in that they invest in the shares of other companies. However, investors in investment companies hold share assets, not unit assets.
There are two types of financial investment funds, money market funds and non-money market funds.
Money market financial investment funds
Money market funds include cash management trusts and cash common funds. They invest primarily in bank deposits and money market transferable debt instruments with a residual maturity of less than one year (such as bank certificate of deposits). Table 27.10 shows the financial assets and liabilities of money market financial investment funds.
LIABILITIES
Non-money market financial investment funds
Non-money market investment funds invest in financial assets. The funds include unlisted mortgage trusts, listed and unlisted equity trusts, and wholesale (master) trusts. Table 27.11 shows the financial assets and liabilities of non-money market financial investment funds.
LIABILITIES
CENTRAL BORROWING AUTHORITIES
Central borrowing authorities are institutions established by the state governments and the Northern Territory Government primarily to provide finance for public corporations and quasi-corporations, and other units owned or controlled by those governments. They also arrange investment of the units' surplus funds. The central borrowing authorities borrow funds, mainly by issuing securities, and lend these funds to their public sector clientele. However, they also engage in other financial intermediation activity for investment purposes, and may engage in the financial management activities of the parent government. Table 27.12 shows the financial assets and liabilities held by the central borrowing authorities.
LIABILITIES
(a) Net asset value.
SECURITISERS
Securitisers are trusts or corporations that pool various types of assets such as residential mortgages, commercial property loans and credit card debt, and package them as collateral backing for bonds or short-term debt securities, referred to as asset-backed securities. These are then sold to investors. The most common assets bought by securitisers are residential mortgages, originated by financial institutions such as banks and building societies or specialist mortgage managers. Securitisers generally pool the assets and use the income on them to pay interest to the holders of the asset-backed securities. Table 27.13 shows the financial assets and liabilities held by the central borrowing authorities.
LIABILITIES
OTHER FINANCIAL CORPORATIONS
This classification comprises other financial intermediaries, financial auxiliaries, money lenders and other captive financial institutions.
Included in other financial intermediaries are:
Financial auxiliaries are units that engage primarily in activities closely related to financial intermediation, but they themselves do not perform an intermediation role. Auxiliaries primarily act as agents for their clients (often other financial entities) on a fee-for-service basis, and therefore the financial asset remains on the balance sheet of the client, not the auxiliary. However, a small portion of the activities of auxiliaries is brought to account on their own balance sheet, and these amounts are included in table 27.14. Financial auxiliaries include insurance brokers or consultants, derivative dealers, fund managers, stock brokers or traders and investment advisors.
Money lenders are units providing financial services where most of either their assets or liabilities are not transacted on open financial markets. Also included are units that provide financial services exclusively from their own funds, or funds provided by a sponsor, to a range of clients and incur the financial risk of the debtor defaulting.
Other captive financial institutions are units characterised by having a balance sheet holding financial assets, usually on behalf of other companies. These institutions are usually legal entities such as corporations, trusts, or partnerships established by their parent unit for a specific and limited purpose. Captives typically have little or no employment or operations and usually do not undertake significant production. This category excludes the captive financial institution central borrowing authorities, which are included in a category of their own. Included are financial investment syndicates, which are not open to public subscription (e.g. mortgage syndicates) and holding companies with predominantly international assets and liabilities.
Table 27.14 shows the financial assets and liabilities held by other financial corporations.
LIABILITIES