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Banking inAustralia is dominated by four majorbanks:Commonwealth Bank,Westpac,Australia & New Zealand Banking Group andNational Australia Bank. There are several smaller banks with a presence throughout the country which includesBendigo and Adelaide Bank,Suncorp Bank,^[1] and a large number of otherfinancial institutions, such ascredit unions,building societies andmutual banks, which provide limited banking-type services and are described asauthorised deposit-taking institutions (ADIs). Many large foreign banks have a presence, but few have aretail banking presence. Thecentral bank is theReserve Bank of Australia (RBA). The Australian government’sFinancial Claims Scheme guarantees deposits up to $250,000 per account-holder per ADI in the event of the ADI failing.^[2]

Banks require abank licence under theBanking Act 1959. Foreign banks require a licence to operate through a branch in Australia, as do Australian-incorporated foreign bank subsidiaries. Complyingreligious charitable development funds are exempt from the banking licence requirement.^[3]

Australia has a sophisticated, competitive and profitable financial sector and a strong regulatory system.^[4] For the 10 years ended mid-2013, the Commonwealth Bank was ranked first in Bloomberg Riskless Return Ranking a risk-adjusted 18%. Westpac Bank was in fourth place with 11% and ANZ Bank was in seventh place with 8.7%.^[5] The four major banks are among the world's largest banks by market capitalisation and all rank in the top 25 globally for safest banks. They are also some of the most profitable in the world.^[4] Australia's financial services sector is the largest contributor to the national economy, contributing around $140 billion to GDP a year. It is a major driver of economic growth and employs 450,000 people.^[4]

Deregulation of the financial sector commenced in the mid-1960s, with the removal of the distinction between and separation of trading and savings banks. Building societies were allowed to take deposits from the public. Banking in Australia is notable by the small number of large banks in the market. Much of this concentration is the result of bank acquisitions.English, Scottish and Australian Bank was acquired by theANZ Bank in 1970. In 1982, theBank of New South Wales merged with theCommercial Bank of Australia to form Westpac. There were many other bank mergers and acquisitions throughout Australia's banking history. Beginning in the 1980s, several building societies sought to convert to banks, but were required todemutualise before they were permitted to do so. This included NSW Building Society, which becameAdvance Bank,St George,Suncorp, Metway Bank,Challenge Bank,Bank of Melbourne andBendigo Bank. A change in regulations allowed building societies and credit unions to become banks without having to demutualise, and several includingHeritage Bank have converted since 2011 while retaining their status and structure as mutual organisations.

In 1990, the government adopted a "four pillars policy" in relation to banking in Australia and announced that it would reject any mergers between thebig four banks.^[6] This is long-standing policy rather than formal regulation, but it reflects the broad political unpopularity of further bank mergers. A number of commentators have argued that the "four pillars policy" is built upon economic fallacies and works against Australia's better interests.^[7]

The four pillars policy does not prevent the four major banks from acquiring smaller competitors. In 2000, CBA acquired theColonial Group, which had emerged as a major bank–insurance combine in the 1990s, after the Colonial Mutual insurance group took overState Bank of New South Wales in 1994. The Commonwealth Bank also acquired theState Bank of Victoria in 1990 andBankwest in 2008. Westpac acquired Challenge Bank in 1995, Bank of Melbourne in 1997, and St George Bank in 2008.^[8]

Currently, banking in Australia is dominated by four major banks: Commonwealth Bank, Westpac, ANZ Bank and the National Australia Bank. The top four banking groups in Australia ranked bymarket capitalisation at share price 1 December 2017:

TheCustomer Owned Banking Association (formerly known as Abacus Australian Mutuals) is the industry body representing the more than 100 credit unions, building societies and mutual banks that constitute theAustralianmutual orcooperative banking sector.^[15]

Collectively, Australian customer-owned banks service 4.6 million customers or 'members' (as they are mutual shareholders in the institutions), with total assets of overA$138 billion.^[16] The ten largest customer-owned banks in Australia are:^[17]

Great Southern Bank is Australia's largest customer owned bank having achieved this status with the rebranding from Credit Union Australia on 1 June 2021. PreviouslyHeritage Bank was Australia's largest customer-owned bank, having changed its name from Heritage Building Society in December 2011. A number of credit unions and building societies changed their business names to include the word 'bank', to overcome adverse perceptions of smaller deposit-taking entities. For example, in September 2011Bank Australia (formerly Bankmecu) was announced as Australia's first customer-owned bank.^[18]

Three teachers' credit unions have become known as 'banks'; namely, RACQ Bank (formerly the Queensland Teachers' Credit Union), Bank First (formerly the Victoria Teachers' Credit Union), andTeachers Mutual Bank (formerly Teachers Credit Union).^[19] The Police & Nurses' Credit Union began trading as P&N Bank in March 2013, and some credit unions are electing to use 'mutual banking' as a business tagline, rather than as a business name, as they do not meet the criteria to be called a 'bank'.^[20]

Top 10 Total Assets (2019-2023)

• Heritage & People's Choice (following the merger of People's Choice Credit Union and Heritage Bank)
• Newcastle Greater Mutual Group (following the merger of Newcastle Permanent and Greater Bank)
• Great Southern Bank (previous CUA, Credit Union Australia)
• Teachers Mutual Bank
• Bank Australia
• P&N Bank
• IMB Bank
• Qudos Bank
• Bank First^[21]

There are other retail banks in Australia. These are smaller and oftenregional banks, including theBendigo & Adelaide Bank,Suncorp Bank, theBank of Queensland (including its retail arms ME Bank & Virgin Money. Other banks, such asBankwest,St George Bank andBank of Melbourne, are subsidiaries or alternate trading names of the big four banks. Bankwest (CBA), Bank of Melbourne, St George and BankSA are all trading names of Westpac.

Foreign banks wishing to carry on a banking business in Australia must obtain a banking authority issued by APRA under theBanking Act, either to operate as a wholesale bank through an Australian branch or to conduct business through an Australian-incorporated subsidiary. Foreign banks engaging in retail banking require a full banking licence. Foreign banks which do not wish to obtain a banking authority in Australia may operate arepresentative office in Australia for liaison purposes, but the activities of that office will be restricted.

According to theForeign Investment Review Board, foreign investment in the Australian banking sector needs to be consistent with theBanking Act, theFinancial Sector (Shareholdings) Act 1998 and banking policy, including prudential requirements. Any proposed foreign takeover or acquisition of an Australian bank will be considered on a case-by-case basis and judged on its merits.

There are a number of foreign subsidiary banks, however only a few have a retail banking presence;ING Bank (Australia) Limited (trading asING),HSBC Bank Australia (a subsidiary ofHSBC), Delphi Bank (formerly the 'Bank of Cyprus Australia', and in 2012 acquired by Bendigo & Adelaide Bank), Bank of Sydney (with a full banking licence since 2001) have a small number of branches.^[22]

Foreign banks have a more significant presence in the Australian merchant banking sector.

Formally, there is extensive and detailed regulation of Australia's banking system, split mainly between theAustralian Prudential Regulation Authority (APRA) andAustralian Securities & Investments Commission (ASIC). TheReserve Bank of Australia also has an important involvement. However, in practice, banks in Australia are self-regulated through external dispute resolution (EDR) schemes, the most prominent of which is theAustralian Financial Complaints Authority (AFCA).

APRA is responsible for the licensing and prudential supervision ofauthorised deposit-taking institutions (ADIs) (banks, building societies, credit unions, friendly societies and participants in certain credit card schemes and certain purchaser payment facilities), as well as life and general insurance companies and superannuation funds. APRA issuescapital adequacy guidelines for banks which are consistent with theBasel II guidelines. All financial institutions regulated by APRA are required to report on a periodic basis to APRA. Certain financial intermediaries, such as investment banks (which do not otherwise operate as ADIs) are neither licensed nor regulated under theBanking Act and are not subject to the prudential supervision of APRA. They may be required to obtain licences under theCorporations Act 2001 or other Commonwealth or State legislation, depending on the nature of their business activities in Australia.

ASIC has responsibility formarket integrity andconsumer protection and the regulation of certain financial institutions (including investment banks and finance companies). However, ASIC does not actually investigate any issues or propose any regulations that concern consumer protection, this authority is delegated to the EDR schemes and theAustralian Competition & Consumer Commission (ACCC). The front face of the regulation of financial institutions and financial advisers are the various EDR schemes, the most popular of which is AFCA. ASIC is responsible for the approval of EDR schemes, all of which must comply with ASIC Regulatory Guide 139.^[23]

Banks are also subject to obligations under theAnti-Money Laundering and Counter-Terrorism Financing Act 2006 as "reporting entities". They are required to identify and monitor customers using a risk-based approach, develop and maintain a compliance program, and report toAustralian Transaction Reports and Analysis Centre certain cash transactions as well as suspicious matters and file annual compliance reports.

There have been calls in recent times for an added level of regulation of banks following lending, foreign exchange, and financial planning controversies between 2009 and 2017, highlighted in 2016 Senate inquiries.^[24][25] Referring to white collar crime, ASIC's ChairmanGreg Medcraft said 'This is a bit of paradise, Australia, for white collar [crime]'.^[26] In December 2017 the Australian Government established theRoyal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry to inquire into and report on misconduct in the banking, superannuation and financial services industry.^[27][28] The interim report^[29] from the Royal Commission prompted the industry to revamp its banking code. The code has been criticised^[30] as needing to be legally binding, strictly liable and breaches criminal.^[31]

During the course of every day, each bank executes a large number of transactions, such as payroll, retail and business purchases, credit card payments, etc. Some involve cash (or its equivalent) coming into the bank and others of cash going out. Banks do not have a reliable way of predicting what or how much those transactions will be. At the end of each day banks must reconcile their positions. The bank that finds itself with a surplus of cash would miss out earning interest on the cash, even if it's for only one night. Other banks may find that they had more money going out than coming in, and the bank must borrow cash to cover the shortfall. To meet its liquidity obligations, the bank with the shortfall would borrow from a bank with a surplus in theinterbank lending market. Depending on the bank's assessment of the type of shortfall and costs, the bank may take out an overnight loan, the interest rate of which is based on thecash rate, which is set by theReserve Bank (RBA) every month (currently 0.10%);^[32] or else take out a "short duration loan", known as "prime bank paper", for a term of between one and six months and whose interest rate is called the "bank bill swap rate" (BBSW), which is set by the commercial banks.

Until July 2017 a body called the Australian Financial Markets Association (AFMA) determined the BBSW rate. Since July 2017 the ASX calculates the rate.^[33] Until 2013, AFMA would every morning at 10am ask each of the "prime banks" what interest rates they will be offering or asking for that day. AFMA would then calculate the BBSW rate as the average of those quotes. Normally, the longer the term, the higher the offered rate. The system required some level of subjective judgement by the banks, because there was a rapidly changing market on multiple broker screens. AFMA changed the method of calculating the BBSW rate to be based on a multimarket electronic feed of live bids and offers. ASX would later add the use of market transactions in addition to these live bids and offers. Besides affecting the BBSW rate, many other financial rates are based on it.^[34] TheAustralian Securities & Investments Commission (ASIC) monitors the BBSW system.

There arises from time to time a situation when there are insufficient funds in the interbank lending market to enable the banks to balance their books. Some banks, for example, may be experiencing abank run or may be withholding funds from the market expecting a heightened demand in the near future. The Reserve Bank's role includes ensuring liquidity in the banking system, including acting aslender of last resort in times of a liquidity crisis.^[35]

The United States has enacted theForeign Account Tax Compliance Act. (FATCA) which came into effect on 1 July 2014, which aims to prevent tax evasion by US tax residents who hold foreign accounts by requiring foreign financial institutions to report details and interest income to theUS Internal Revenue Service (IRS). Australia has signed an Intergovernmental Agreement (IGA) with the United States which sets out rules to enable Australian financial institutions to report to the Australian Taxation Office (ATO) which in turn passes the information to the IRS. FATCA affects US citizens, US tax residents and certain types of organisations that are controlled by them. To comply with FATCA, Australian banks ask customers to declare their US tax status.^[36]

Between white settlement inSydney in 1788 and 1817, there were no banks nor much currency in the colony. The first bank in Australia was theBank of New South Wales, established in Sydney in 1817.^[37] During the 19th and early 20th century, the Bank of New South Wales opened branches throughout Australia and Oceania: atMoreton Bay (Brisbane) (in 1850), then inVictoria (1851),New Zealand (1861),South Australia (1877),Western Australia (1883),Fiji (1901), Papua (now part ofPapua New Guinea) (1910) andTasmania (1910). It was by far the most dominant bank throughout Australia until into the 1960s.

TheCommercial Banking Company of Sydney was established in 1834, and theNational Bank of Australasia established in Melbourne in 1858, and set up branches in other Australian colonies:Tasmania (in 1859),Western Australia (1866),New South Wales (1885) andQueensland (1920), and aLondon branch (1864). After acquiring a number of other banks over the years, these two banks merged in 1982 to form the National Commercial Banking Corporation of Australia, which was renamed theNational Australia Bank.

In 1835 a London-based bank called the Bank of Australasia was formed^[38] that would eventually become theANZ Bank. In 1951, it merged with theUnion Bank of Australia, another London-based bank, which had been formed in 1837. In 1970, it merged with the English, Scottish and Australian Bank Limited, another London-based bank, formed in 1852, in what was then the largest merger in Australian banking history, to form the Australia and New Zealand Banking Group Limited.

A speculative boom in the Australian property market in the 1880s led to theAustralian banking crisis of 1893. This was in an environment where little government control or regulation of banks had been established and led to the failure of 11 commercial banks, even the National Bank of Australasia.

Until 1910, banks could issue private bank notes, except inQueensland which issued treasury notes (1866–1869) and banknotes (1893–1910)^[39] which were legal tender in Queensland. Private bank notes were not legal tender except for a brief period in 1893 in New South Wales.^[39] There were, however, some restrictions on their issue or other provisions for the protection of the public. Queensland treasury notes were legal tender in that state.

Private bank notes and treasury notes continued in circulation until 1910, when the federal Parliament passed theAustralian Notes Act 1910 which prohibited the circulation of state notes as money and theBank Notes Tax Act 1910 imposed a prohibitive tax of 10% per annum on 'all bank notes issued or re-issued by any bank in the Commonwealth ... and not redeemed'. These Acts put an end to the issue of notes by the trading banks and the Queensland Treasury. Also in 1910, theAustralian pound was first issued as the legal tender in Australia. Now, theReserve Bank Act 1959 expressly prohibits persons from issuing bills or notes payable to bearer on demand and intended for circulation.^[40]

The federal government established theCommonwealth Bank in 1911, which by 1913 had branches in all six states. In 1912, it took over theState Savings Bank of Tasmania (est. 1902)^[41] and did the same in 1920 with theQueensland Government Savings Bank (est. 1861). As with many other countries, theGreat Depression of the 1930s brought a string of bank failures. In 1931, Commonwealth Bank took over two faltering state savings banks: theGovernment Savings Bank of New South Wales (est. 1871) and theState Savings Bank of Western Australia (est. 1863). In 1991, it also took over the failingState Bank of Victoria (est. 1842).

As a response to the Great Depression, banking in Australia became tightly regulated. Until the 1980s, it was virtually impossible for a foreign bank to establish branches in Australia; with the consequence that Australia had fewer banks compared to countries such as theUnited States andHong Kong. Moreover, banks in Australia were classified as eithersavings banks ortrading banks. Savings banks paid virtually no interest to their depositors and their lending activities were restricted to providingmortgages. Many of these savings banks were owned by state governments. Trading banks were essentiallymerchant banks, which did not provide services to the general public. Because of these and numerous other regulatory restrictions, other forms ofnon-bank financial institutions flourished in Australia, such asbuilding societies andcredit unions. These were regulated by state laws and were subject to less stringent regulations, could provide and charge higher interest rates, but were restricted in the range of services they could offer. Above all, they were not allowed to call themselves "banks".

From 1920, the Commonwealth Bank performed somecentral bank functions, which were greatly expanded duringWorld War II. This arrangement caused some discomfort for the other banks, and as a result theReserve Bank of Australia was created on 14 January 1960 and assumed the central bank functions previously performed by the Commonwealth Bank, including managing the currency, the money supply and exchange control.

Banks have adopted new technologies in order to reduce operating costs. The rollout ofautomated teller machines (ATMs) commenced in 1969. There are currently a number of ATM networks operating in Australia, the largest five of which are: theCommonwealth Bank-Bankwest network (with over 4,000 machines),NAB-rediATM network (with over 3,400 machines),Westpac-St George-BankSA and Bank of Melbourne network (with over 3,000 machines),ANZ (with over 2,600 machines) andSuncorp (with over 2,000 machines), and others.^[42] Financial institutions are linked viainterbank networks.

The use of theBank State Branch (BSB) identifier was introduced in the early 1970s with the introduction ofMICR on cheques to mechanise the process of data capture by the banks as well as for mechanical sorting and bundling of physical cheques for forwarding to the payer bank branch for finalcheque clearance. Since then, BSBs have been used in electronic transactions (but is not used in financial card numbering).

EFTPOS technology was introduced in 1984. Initially, only the banks' existing debit and credit cards could be used, but in 1985, the ATM (Financial) Network was created to link EFTPOS systems to provide access for all customers. Cards issued by all banks could then be used at all EFTPOS terminals nationally, but debit cards issued in other countries could not. Prior to 1986, the Australian banks organized a widespread uniform credit card, called Bankcard, which had been in existence since 1974. There was a dispute between the banks whether Bankcard (or credit cards in general) should be permitted into the proposed EFTPOS system. At that time several banks were actively promoting MasterCard and Visa credit cards. Store cards and proprietary cards, such asfuel cards andBartercard, were shut out of the new system, though they use compatible technology.

The widespread acceptance of credit cards and the development ofSSL encrypted technology in mid 1990s opened the way toE-commerce.Telephone banking was introduced in the 1990s, withinternet banking being introduced after 1995 andmobile banking after the 2010s. Bain, Research Now and Bain^[43] along with GMI NPS surveys in 2012 found that 27% of Australians have had mobile banking transactions in the previous three months.^[44] These innovations have resulted in significant shifts in banking in Australia away from the use of bank branches, and resulting in branch closures and staff cuts.^[45][46]

The banking industry was slowly deregulated. In the mid-1960s, the distinction between and separation of trading and savings banks was removed and all banks were allowed to operate in themoney market (traditionally the domain ofmerchant banks), and banks were allowed to set their own interest rates. Building societies were allowed to take deposits from the public.Foreign exchange controls were abolished and theAustralian dollar was permitted tofloat from December 1983.

Banking in Australia is notable by the small number of large banks in the market. Much of this concentration is the result of bank acquisitions.English, Scottish and Australian Bank was acquired by theANZ Bank in 1970. In 1982,Bank of New South Wales merged with theCommercial Bank of Australia to form Westpac. There were many other bank mergers and acquisitions throughout Australia's banking history. The boom and bust of the 1980s was a turbulent period for banks, with some establishing leading market positions, while others being absorbed by the larger banks. Beginning in the 1980s, several building societies sought to convert to banks, but were required todemutualise before they were permitted to do so. This included NSW Building Society, which becameAdvance Bank,St George,Suncorp, Metway Bank,Challenge Bank,Bank of Melbourne andBendigo Bank. A change in regulations allowed building societies and credit unions to become banks without having to demutualise, and several includingHeritage Bank have converted since 2011 while retaining their status and structure as mutual organisations.

In 1990, the government adopted the "four pillars policy" in relation to banking in Australia and announced that it would reject any mergers between the four big banks.^[6] The four pillars policy, however, has not prevented the four major banks from acquiring smaller competitors. In 2000, CBA acquired theColonial group, which had emerged as a major bank–insurance combine in the 1990s, after the Colonial Mutual insurance group took overState Bank of NSW in 1994. The Commonwealth Bank also acquired theState Bank of Victoria in 1990 andBankwest in 2008. Westpac acquired the Challenge Bank in 1995, Bank of Melbourne in 1997, and St George Bank in 2008.^[8]

The Australian government's direct ownership of banks ceased with the full privatisation of the Commonwealth Bank between 1991 and 1996. There was also increased competition from non-bank lenders, such as providers ofsecuritised home loans. A category ofauthorised deposit-taking institution (ADI) was created for a corporation which is authorised under theBanking Act 1959 to take deposits from customers. The change formalised the right of non-bank financial institutions – such asbuilding societies andcredit unions – to accept deposits from non-members.

Following theWallis Committee Report, theAustralian Prudential Regulation Authority (APRA) was established on 1 July 1998 to take over from the RBA the oversight of ADI's and other financial institutions in Australia, e.g., banks,credit unions,building societies,friendly societies,general insurance andreinsurance companies,life insurance and most members of thesuperannuation industry. The Payments System Board (PSB) was also created, to maintain the safety and performance of thepayments system.

At the time, consumer credit in Australia was primarily loaned in the form ofinstallment sales credit. The arrival of hundreds of thousands of readily employable migrant workers under the post-war immigration scheme, coupled with intense competition amongst lenders, discouraged proper investigation into buyers.^[47] Concerns about the possibly inflationary impact of lending created the first finance companies in Australia.^[47]

In June 2017 the Treasurer, Hon Scott Morrison MP, initiated the Open Banking Review. Open Banking is to encourage more efficiency in the market, create new opportunities for market entrants, encourage competition and give customers greater control over their data. This was finalised in March 2018.^[48]

In 2018 APRA created arestricted ADI framework.^[49] The framework is designed to encourage new entrants to the banking industry, particularly small firms with limited financial resources, to navigate the licensing process. Eligible entities can conduct a limited range of business activities for two years while they progress towards an unrestricted status. APRA announced and authorised the first restricted ADI,Volt Bank, on 7 May 2018. On 1 September 2022, APRA announced it had revoked Volt Bank Limited's (Volt) authorised deposit-taking institution (ADI) licence under the Banking Act 1959.^[50]

• State Bank of Victoria (1842-1990)
• Bankwest (1895-1995)
• State Bank of South Australia (1896-1991)
• Commonwealth Bank (1911-1991)
• State Bank of New South Wales (1933-1994)
• Trust Bank of Tasmania (1991-1999)

• Australian Banking Association
• Economy of Australia
• Financial system in Australia
• List of banks in Australia
• Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
• Timeline of banking in Western Australia
• Banking Code

• Pitt, Michael T. (2013).Renniks Australian Coin and Banknote Values: Over 49 Years as the Premier Guide for Coins and Banknotes. Renniks Publications.ISBN 978-0-9873386-2-4.

• Australia's Banking History, ABC

• Banking in Australia
• Banks of Australia

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