Accounting management of : Financial system of Australia
Introduction
This essay gives the brief overview about the financial system of the Australia and compares it with the financial system of India. It is examined that the Australia has population of approximately 20.6 million (Law Council of Australia, 2006). The economy of the Australia is ranked on 15th in size and have 1900 entities registered on the ASX. The market capitalization of the registered entities on the ASX is about US $ 900 billion. The structures of financial system change constantly in relation to the financial innovation and alterations in both regulatory framework and economic environment. In the last decade, all of these kinds of factors have created major alterations and creating it the most exciting period in the financial history of the Australia. It is viewed that Reserve Bank of the Australia started its operations in Jan 1960 and which offers the starting point for the evaluation of the banking of the Australia. It has been analyzed that main strengths of the model of the Australia is ASIC and APRA which independently follow their corporate regulation and prudential integrity aims, while taking sufficient account of other’s distinct perspectives. APRA referred as the independent prudential regulator of the general and life insurance companies; retirement saving account and superannuation funds (Bijit & Mervyn, 2010). APRA is offered with the complete powers comprising over licensing. It can be said that the APRA is in the procedure of forming the financial standards throughout the outline of the laws formed for it. It is also viewed that ASC has been again named as ASIC. In summation to the regulatory roles of the earlier ASC, ASIC body has taken accountability for market integrity and consumer protection in the regions of superannuation, insurance and features of payments and banking system. It has been analyzed that respect businessman of the Australia, Stan Wallis initiated the inquiry that became known as Wallis Inquiry. So, Wallis was capable to refer what must be the nature of financial system of the Australia with no any stress for redressing the systematic, other regulatory and financial failure. For working properly, the model of twin peaks needs a great degree of the commitment from both kind of agencies at operational and Board level for achieving continuing real time knowledge communicating about mutual concerns and emerging risks.
Due to enhancing internalization of the financial activities, the knowledge needed for the supervision of the market may be beyond the scope of the national regulatory authority in specific jurisdictions (Business Council of Australia, 2005). The international cooperation among the regulators is essential for the efficient regulation of the local markets. In, fact most of the market conduct of the Australia and the disclosure regulation is impacted by the global issues varying from the actions of international financial institutions in the markets, enforcements issues comprising offshore transaction, difficult cross border structures of ownership and the policy issue comprising global regulatory standards. Wallis referred that the regulatory structure could have single regulator and able to transact with identified facet of the market failure such as market misconduct, anti competitive nature, information asymmetry and systematic instability. Though, Wallis has not favored the single and mega regulator agency because he thought that the current agencies with alterations to their functions and powers shall execute best with their different cultures and the single controller with all functions may become more powerful and all functions may be too broad to combine in the one agency with the full power (Ruhl & Salzman , 2003). Due to this, the Committee had determined that the better structure for the Australia could comprise two regulators such as one is accountable for the prudential regulation of the entity which required to be regulated prudentially and second one is accountable for the market and the disclosure regulation of the financial services and products being provided to the consumers of the Australia. In relation with the recommendations of the Committee, the Government has adopted the model of twin peaks of the financial regulation and has formed ASIC and APRA bodies. It is examined that ASIC was offered with the authority to regulate consumer protection and market integrity with the purposes of promoting consumer confidence and market fairness whereas APRA was offered with the authority for regulating asymmetric information obstacles by enforcing and setting standards of the prudential behavior on institutions creating promises in regions of insurance, deposit taking and superannuation.
The Government maintained the established RBA and ACCC with slightly alter powers. The RBA views systematic stability and ACCC monitors’ anti-competitive nature. Under the model of twin peak, APRA referred as the national controller of the prudential institutions of insurance companies, superannuation funds and deposit takers. APRA is mainly the supervisor agency and the purpose of the agency is to make sure that the financial promises created by the regulated bodies are met with efficient, stable and aggressive financial market (Chinn, 2008). APRA ensures that the excellence of the financial institution system helps in measuring, managing and identifying of the several risks in the business and performs to minimize the uncertainty of failure (Hornstein, 2005). When failure occurs, APRA works for maintaining the confidence of the public in the financial system by assisting the business entity to make the orderly exit from the place of the market. It has been analyzed that main strengths of the model of the Australia is ASIC and APRA which independently follow their consumer protection and prudential integrity aims, while taking sufficient account of differing perspectives (Regulation Taskforce, 2006). For working properly, the model of twin peak needs a greater degree of the dedication from both kind of agencies at operational and Board level for achieving constant information about mutual concerns and emerging risks.
Indian Financial System
On the other side, the financial sector of the India has faced the better environment for growing with the essence of the higher competition (Khatkhate, 2005). It is analyzed that financial system of the India is controlled by the independent controllers in the areas of insurance, capital market, mortgage and banking. In, fact the Indian Government performs the considerable function in regulating the financial markets of the India. The RBI is the apex institution for controlling the banking system of the India whereas the SEBI considered as one of regulatory authority for the capital market of the India. It is very clear that one applicable feature of the financial system of the India is complexity in terms of numerous regulators, non regulatory bodies, quasi regulatory and their overlapping and explained spheres of influence and concern (Business Council of Australia, 2005). It is very clear that regulation in the India is greatly dependent on institutions and institutional lines and report to the single regulator. It is also examined that there are adequate grounds for quick overhaul of current system of the supervision by the distinct agencies (SEBI, RBI, and IRDA) and make the unified structure in the India. One region of the possible conflict would have been the debt market regulation, but the Indian government has issued the notification in year 2000 and outlining the accountabilities among the SEBI and RBI. It has been evaluated that products being provided by the several intermediaries are unrelated and don’t combine characteristics of the insurance policies, bank deposits and investment (Bijit & Mervyn, 2010). In fact, the direct participation of the banks in the market of equity is very insignificant. After considering these points, particularly the institutional settings of the India and the limitations of the unified structure, now it is believed that the current supervision arrangement by the distinct agencies might continue (Khatkhate, 2005). To avoid duplication and overlaps, there is the requirement for devising some procedures between 3 main regulators for exchanging information and manage their activities. This would be achieved in various ways with the help of macro and micro level coordination. For Example HLCC was formed with the restricted purpose of finding out the differences between the regulators on the policy issues.
ConclusionAt last it can be said that the government of the Australia and its bodies comprising ASIC and ARPC are dedicated to perfecting the model of the financial regulation. The Government of Australia has determined that for better structure, the financial system should have more one regulator such as one is responsible for the prudential regulation of the entity and second one is responsible for the market and disclosure regulation of financial products and services being offered to the users of the Australia. On the other side, the regulation of the India is highly dependent on intuitional lines and institutions and report to the single regulator.
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