BUSINESS

Business

Business

Part 1

The first case is distinguishing between the Reserve Bank of Australia and Australian Prudential Regulation Authority. The case is all about the investigation and decision taken by Reserve Bank of America that has affected the banking industry. The Reserve Bank of Australia (Reserve Bank of Australia in Spanish) is the central bank of Australia. Came into existence on January 14, 1960 as Australia's central bank and banknote Issuing Authority (Central Bank of Australia and Authority Expedio ticket), when the Law of the Reserve Bank from 1959 eliminated banking functions of the Commonwealth Bank of Australia. The Bank has a responsibility to serve the Government of Australia, which bank profits are transferred back, plus it also provides services to other central banks and official institutions. Today is the Payments System Board, which governs the payment system policy of the Bank and the Reserve Bank Board, which regulates all other monetary and banking the bank.

Both composed of members of the Bank and the Australian Treasury, other Australian government agencies, and leaders of other institutions that are part of the economy. The structure of the Reserve Bank has remained constant, even since 1951, with the exception of changing the number of members. The governor of the Reserve Bank of Australia is appointed by the Treasurer and has office in Payment Systems as well as in the Reserve Bank Board and when there are disagreements between them, the Governor is the one that resolves.

According to the investigation of the RBA, funding cost it has signaled that cutting in the interest rates might be the possibility. The investigation is directed towards the betterment of the labor cost or enhancement in the productivity. Their focus is on the cost rather than prices keeping in view about the inflation. According to their investigation, lending rates that are set by the bank can be affected through number of factors such as, equity funding, cost of debt and the losses that can be achieved on their lending activities. According to their investigation, increment in the expected losses on loans and equity capital has little effect on the mortgage lending rates because reduction in the funding cost will affect the deposit in the bank and the borrowing rate. The reason behind is the increase in the competitive pressure to raise the risk premium for the banking sector has increased. RBA has also highlighted that monetary policy tools are strong enough even though four Australian lenders have increased the mortgage lending rates. Higher funding cost has affected banking sector as it has narrowed their margins of profit.

According to Reserve Bank, it has made the comparison between funding cost and cash rates that are “funding costs have been increased since 2011 by 0.2 percent.” The rate cut by increasing funding cost has impact on narrowing down of the margins of the banks. They are also thinking to cut down the rates that will negatively affect the business of the banks. For stimulating the activities, they have focused to improve the ...