Letter of Transmittal


Mr. Tutor

University Campus



Please accept the accompanying Money and Capital Market Assignment discussing about the differences and similarities between the structure of financial regulatory system between Australian and Singapore.

This assignment is being done through the past few weeks. After doing a sufficient research, obtaining adequate information on this topic and listening to your advices, this assignment has finally being completed. In this opportunity, the writer would like to thank Mr. for his time and patience in guiding her along doing this assignment.

            After completing this assignment, the writer believed that she has gained deeper knowledge regarding Australian and Singapore financial regulatory system. This is believed to be useful in the writer’s future study.












Overview of Financial System

The financial system is defined as set of financial markets and financial institutions that enable the flow of funds from the lender (surplus unit) to the borrower (deficit units) (, 1991; , 2003). Generally, the financial institutions and markets that exist today in most countries are similar in functions while it may be differ in terms of structure or level of regulation by the authorities ( & , 2000). 

In financial system, mainly there are two main markets namely the capital market and money market. The capital market are set up for investments and borrowings in a long term usually over one year or known as a  long term market, whereas the money market deals with all short term funds, usually less than a year or short term markets (, 2003;  & , 2000; , 2000). Within those markets, there are primary and secondary market as well as the foreign exchange market and the derivative market, which deals with both short and long term funds. The financial institutions play role as intermediaries between the lender and the borrower in the system (, 2000). The institutions also offer financial products and services to the public.

The financial system in most countries plays an important role for the economy of the countries. It promotes and allocates savings mainly from lender to borrower, which means it enable, the efficient uses of funds by the users. Which indirectly affects investment level by allocating those funds to the investors and ultimately it also helps in assisting the implementation of government or regulatory policy that eventually effect economic growth ( & , 2000).

Australia Financial System

            The Australian financial system consists of financial markets and financial institutions. Currently, the financial system involves regulatory framework that is use to maintain the stability of the system through imposing certain regulations on the institutions.

            In Australia, the financial institutions are distinguished into several groups. Firstly, Bank institutions that are supervise by the central bank (Reserved Bank of Australia). Secondly, the Non Bank Financial Institutions like permanent building societies, credit unions, authorized money market dealers, finance companies and merchant banks. Banks and non bank financial institutions are the forms of intermediaries whereby the funds can be transferred between ultimate savers and ultimate borrowers. Thirdly are managed funds which are life insurances, superannuation funds, approved deposit funds, and public unit trusts ( & , 1997). Since 1998, credit unions are come under APRA which have role of taking deposit form into personal loans and lend to the users in market.  However, in building societies which come under AFICs before transferring the power to APRA in 1998, have a role to provide a housing loan and mortgage finance to home buyers. Lastly, finance companies borrow funds from the professional and institutional market and lend it out in areas such as commercial property through leasing (, 1998).







Regulated financial system

After experiencing the failure of many institutions especially banks back in 1940s, the RBA applied various controls, which on banks interest rate and assets portfolio and the financial system responsibilities. In fact, the RBA cannot control the operation of financial systems. Its control were reducing the economic efficiency of the system as the impact of banks which can not compete their fund on the basis of the price and lent only to the most creditworthy customers and thus, they can not compete actively with others or with NBFIs (, 1997).

At the beginning of 1980s, Campbell Committee reviewed the Australian financial system that is about the operating restriction by bank. Campbell Committee suggested deregulating to improve the efficiency through greater competition so that the domestic banks would attempt to strengthen their market position. The principal effect of deregulation on regularly bodies (particularly the RBA) was to shift the focus from controlling the business of intermediaries to one of the prudential supervision (, 1997, ). There are some objectives in carry out the deregulation such as to remove the restriction that impeded competition in the finance sector, to ensure that intermediaries take responsibility for their business decisions and to protect the integrity of the payment system as well as depositors’ funds through a regime of prudential supervision (. , 1997)








The Australian financial regulatory system


With a view in need of regulation to the financial institutions, the financial regulators are set up in response to the needs. Each of these financial institutions (, NBFIs, and managed funds) has financial regulator respectively. There are four main financial regulators framework in Australia which are Reserve Bank of Australia (RBA), Australian Prudential Regulation Authority (APRA), Australian Securities and Investments Commission (ASIC) and Australian Competition and Consumer Commission (ACCC) (, 2003).

The Reserve Bank of Australia (RBA) is the central bank of Australia. It is part of Commonwealth bank that was established in 1911(, 1991). In 1924 the first central banking were acquired their authority, when the Commonwealth Bank have power over the issue of notes (, 1991). The role of Australia’s central bank was first identified in the 1936-1937 Royal Commission into Money and Banking (, 1991). Generally the RBA play the important role in the regulatory framework of the financial system.  The objective of the RBA is to ensure the stability the currency of Australia or to keep inflation low, maintenance of full employment (anti inflationary level), and to smooth the economic growth and keep welfare of the people of Australia (, 2003).

In July 1998,  established the APRA (Australia Prudential Regulation Authority). APRA is the statutory authority which took over prudential supervision utility from the insurance and superannuation commission (ISC) and as well as from RBA in supervising the institutions (, 1998). In this case APRA supervises all of the deposit taking institution, credit unions, building societies, friendly societies, general insurances, life insurances, and superannuation funds. Instead, APRA plays essential role in the success of financial sector such as prudential supervision in the financial industry which is to provide the disclose information for the consumers that related to the financial products and ensure that the products are secure for the consumers (, 2003).

ASIC was established in 1991 as the part of the Australian Investment Commission (ASC) and the ISC (, 1991). ASIC has the responsible in supervising the insurance, superannuation funds, and public unit trusts. It also has a consumer protection, observe the market integrity and ensure that the public disclosure of information needed by investors and creditors (, 2003). In the financial institution it is important component to organize their authorized in order to build the confidence of depositors or consumers.

The Australian Competition and Consumer Commission was established on 6 November 1995 by the merger of Trade Practices Commission and the Prices Surveillance Authority. In this case the objective of ACCC is to view the consumers’ protections and market integrity (). The responsibility of ACCC is to ensure that the individuals and businesses comply with the commonwealth competition, fair trading and consumer protection laws. The ACCC is the only national agency which is dealing with competition matters and also has a plan to promote consumer education in local areas and communities. ()








Comparison in regulatory framework











Australian Model of Regulatory Framework

In Australia, each regulator is responsible for each of the market. The main role is played by RBA responsible to maintain the systemic stability of the financial system through its functions. As for the competition area will be handle by ACCC, mainly to promote a healthy competition on the market. In terms of how financial institutions should behave by taking into account consumers protection will be administer by ASIC. The APRA role is as a prudential supervisor to make sure the financial institutions behave in the most correct manner in the industry.

The framework has a strength point where it enables each of the regulatory body to be more focusing their roles and tasks on the regulated institutions. In other words, it will mean increase in efficiency and there should be no overlapping in supervising the financial institutions.

On the other hand, the framework has a shortcoming where financial institutions will have to answer to multiple regulators (, 2003).




The HKMA and the Securities and Futures Commission (SFC) are the two major regulatory bodies for the capital market, with the SFC being the principal regulator of the securities and futures markets. The HKMA was founded on 1 April 1993 by merging the Office of Exchange Fund with the Office of the Commissioner of Banking. As the government’s monetary authority, the HKMA is responsible for maintaining monetary and banking stability to keep the Hong Kong dollar stable, managing the Exchange Fund (Hong Kong’s official reserves) effectively, promoting the safety of Hong Kong’s banking system, and developing sound financial infrastructure for Hong Kong.


The SFC was established on 1 May 1989 under the Securities and Futures Commission Ordinance. It is an independent non-governmental statutory body that is responsible not only for the regulation of the securities and futures markets, takeovers, merger activity, and offers of investment products in Hong Kong, but also for the enforcement of laws regarding market malpractice. To avoid potential conflict of interest, HKEx and its subsidiaries (the SEHK, HKFE, and HKSCC) are also directly regulated by the SFC as listed issuers.





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