REVIEW ESSAY QUESTION
As the well-known 2008 Global Financial Crisis swept through the world, Australian and Canadian financial institutions performed relatively well, with operating stability in financial industry, and no emerge of any banks that are on the verge of bankruptcy or need government rescue. In this paper, in order to retrospect the intrinsic reasons, I will firstly explore the common features of the banking systems in Australia and Canada. Then I will compare their banking systems in structure and regulation with United States. Finally, the different ways mortgage lending is conducted in these three countries will be emphasized.
The common ...view middle of the document...
23). Because of strict government regulations, the divisions of other small banks and foreign banks are difficult to enter Canadian banking industry, let alone to compete with the big five. Also, the business of the big five is quite diverse, comprising of ordinary private banking and investment banking and other financial activities, so that they are like large-scaled universal banks.
Apart from the common feature of high concentration in banks, effective and sound regulation is another primary reason making Australia and Canada copied with GFC. As is universally accepted, both of the banking regulators in Australia (APRA) and Canada (OSFI) hold great conservatism and high capital requirements on their banks. Both countries have unified regulatory agencies and law provisions, which establish strict and conservative standards and requirements.
As for Australia, Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC) are the regulatory agencies of the Australian financial system. APRA and ASIC have close cooperation with an appropriate division of labour. APRA is responsible to formulate prudential standards for financial institutions on banking, insurance, pension and so on, and has been given a wide range of regulatory rights in response to all sorts of financial crisis that may arise. When necessary, APRA can even take over questionable financial institutions. While ASIC is responsible to supervise the behaviours of all companies, and responsible to protect consumer interests and build market integrity in financial sector. The management of APRA and ASIC should be always complied with no matter whichever state banks. This realizes the unification of regulatory agencies. Meanwhile, the local state has no right to authorize the establishment of banks. Besides, APRA puts forward high quantity and quality requirements on banking capital, which ensure banks to have adequate capital to deal with day-to-day operations, or even calmly respond to financial crisis. More concretely, it is the conservative attitude on bank regulation and supervision that produced great financial stability. For example, firstly, Australian banks are required with a more conservative approach adoption in some cases under the Basel II framework. Secondly, the calculation of risk-weighted assets in Australia has to meet higher requirement from APRA so that Australia has more risk-weighted assets than other comparable foreign banks. Thirdly, compared to Australian banks’ ranking in total and Tier 1 capital ratios, these banks rank higher in tangible common equity ratios. This just corresponds to APRA’s conservative capital eligibility and deduction rules, which bring about higher quality capital with Australian banks (Jang & Sheridan 2012, p.7).
As for Canada, the Office of the Superintendent of Financial Institutions (OSFI) has absorbed the functions of the Inspector General of Banks and the Superintendent of...