Starting Business can assist with offshore bank account opening in a number of jurisdictions. The conditions detailed below covers the banking laws, regulatory body, and you the currently operating banks. Learn everything you need to know about Australia bank accounts.
Historically, the Australian banking industry was tightly regulated. Until as recently as the 1980s, it was virtually impossible for a foreign bank to establish branches in Australia; consequently Australia had very few banks when compared with such places as the United States or Hong Kong. Moreover, banks in Australia were divided into two distinct categories, known as saving banks and trading banks. Saving banks paid virtually no interest to their depositors and their lending activities were restricted to providing mortgages. Trading banks were essentially merchant banks, which did not provide services to the general public. Because of these and numerous other regulatory restrictions on banks, other forms of non-bank financial institutions flourished in Australia, such as the building society and the credit union. These were subjected 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”. Originally the role of central bank was performed by the Commonwealth Bank of Australia, then a government-owned but essentially commercially-operated banking organization. This arrangement caused some discomfort for the other banks, and as a result the central bank function was transferred to the newly-created Reserve Bank of Australia on January 14, 1960. At the time, consumer credit in Australia was primarily loaned in the form of installment 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. Concerns about the possibly inflationary impact of lending created the first finance companies in Australia. No changes were made in parliament to address misallocated capital, even as most Australians were seeing their real incomes declining.
The Reserve Bank of Australia is responsible for formulating and implementing monetary policy. Monetary policy decisions involve setting the interest rate on overnight loans in the money market. Other interest rates in the economy are influenced by this interest rate to varying degrees, so that the behaviour of borrowers and lenders in the financial markets is affected by monetary policy (though not only by monetary policy).
The Reserve Bank Board sets interest rates so as to achieve the objectives set out in the Reserve Bank Act 1959
The Reserve Bank Board makes decisions about interest rates independently of the political process – that is, it does not accept instruction from the Government of the day on interest rates. This principle of central bank independence in the operation of monetary policy, in pursuit of accepted goals, is the international norm. It prevents manipulation of interest rates for political ends, and keeps monetary policy focused on its long-term goals.
Prior to 1985, foreign-owned banks had only a limited involvement in the Australian banking system, with just two foreign institutions operating continuously as authorised banks in the post-war period. This situation reflected a moratorium on foreign-bank entry that had effectively been in place during this period. Despite this restriction, foreign banks did participate in the Australian financial system, mainly through wholly owned or part-owned merchant banks, with the merchant banking sector accounting for around 5 per cent of the total assets of financial intermediaries in Australia in the 1970s. The relaxation of foreign-bank entry restrictions announced in 1984 led to the granting of bank licenses to 15 overseas banks over the next year and a half – some to existing merchant banks and some to genuinely new bank entrants. One feature of the entry requirements was that foreign banks assumed subsidiary status rather than a branch structure, thus requiring capital to be held locally.
Despite the recent advances in retail banking, foreign-owned banks still have a larger presence in the business banking market, reflecting the focus of foreign bank branches on wholesale operations. At end 2006, foreign-owned banks accounted for around 18 per cent of total bank business credit outstanding. Business credit extended by these banks has grown very rapidly over the past 18 months, reaching an annual growth rate of over 35 per cent in late 2006, compared to around 16 per cent for Australian-owned banks. This recent strong performance has brought foreign-owned banks’ market share back to around its 2002 level, after their business lending had grown at a below-average rate in the intervening period.
Branches of Foreign Banks
To open a bank account with our assistance or to learn more about Australia banking and opening an Australia offshore bank account, Contact Us today.