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Overwatch Nexus
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Discussion Starter · #1 ·
Was having a conversation last night, and wasn't sure of the answer. Does anyone know the difference between the Reserve Bank of Australia, APRA and the US Federal Reserve? Do they perform the same functions in relation to banking?

The statement that was made was that the US has no equivalent of APRA, ie the banking system in the US is not monitored/regulated at all by the govornment, where as ours is.. It didn't sound right.
 

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Champagne Socialist
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They have the same task of controlling money and the price of money ("cash rate" for RBA "funds rate" for FED), but yeah as above, The RBA and the Fed may have some differing responsibilities and goals although they are essentially both doing the same thing.

ASIC in Australia, SEC in the US, dunno what the equivalent of APRA is in the US - might be something inside the Fed or a separate entity like Australia.

The RBA is a crown corporation (Federal Government sole shareholder) based solely in Sydney with branch offices in other capitals, the FED is set up differently - 12 banks in a "system" of banks across the US: http://en.wikipedia.org/wiki/Federal_Reserve_Bank - i.e each of the 12 Federal Reserves are responsible for banks in their designated areas, in Australia commercial banks just deposit with the RBA in Sydney.

It's essentially 12 banks across the US because banking over there used to be highly controlled and banks in one state didn't necessarily operate in another - that's why American banks only really got "big" in recent times (and Europe is where the behemoths are).
 

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Overwatch Nexus
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Discussion Starter · #4 ·
Thanks Tayser, that's excatly what I needed to know. But the statement still remained that Australias banks are regulated (therefore contributing somewhat to them not collapsing in the GFC) and the US banks are completlety free to act like private companies.

I know it's a complicated issue, but would it be a fair statement that US banks are not regulated by the govornment as strongly (held accountable for their actions) as AUS ones are? I didn't think it was as drastic a difference as my mate was claiming.
 

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The trains are coming
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would it be a fair statement that US banks are not regulated by the govornment as strongly (held accountable for their actions) as AUS ones are?
Not really. Or at least until Enron came along, maybe. Banks that operate in the US must now be Sarbanes Oxley (SOX) Compliant, which is very stringent in terms of internal controls. I've worked for a US investment bank before, and revewing all of those points every year is a massive effort by all concerned.

And before people start going on about the Aussie financial system faring much better than the US, you only need to look back to the 80's when Westpac etc were on the brink of meltdown ,and it was perhaps learning from these mistakes that saved their skin in the GFC.
 

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Champagne Socialist
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Thanks Tayser, that's excatly what I needed to know. But the statement still remained that Australias banks are regulated (therefore contributing somewhat to them not collapsing in the GFC) and the US banks are completlety free to act like private companies.

I know it's a complicated issue, but would it be a fair statement that US banks are not regulated by the govornment as strongly (held accountable for their actions) as AUS ones are? I didn't think it was as drastic a difference as my mate was claiming.
I think they're regulated somewhat similarly except either policing of the regulation is not as tough in the US and the banks have a different culture: i.e US banks were for so long constrained on growth........ the likes of Citigroup (New York), Wells Fargo (San Francisco) and Bank of America (now based in Charlotte but dunno where it started) would have initially only been able to trade in the state they were started in - it's relatively new that American banks have expanded across the country - compared to Australian Banks which, although historically they have their "strong" markets (i.e. ANZ in Victoria, Westpac (Bank of NSW) in NSW), have been free to grow in the different colonies (yes that far back) and states. American banks, unleashed from their previous constraints, have all been about aggressive growth and thus look for newer ways to make cash-money-farken (i.e mortgage derivatives that tanked during the GFC).

Contrast with Australian banks - which are very conservative (exactly the same in Canada with its big 5: Banque de Montréal (BMO Financial - they own all the "first Canadian Places" all over Canada), Canadian Imperial Bank of Commerce (CIBC), Toronto Dominion (TD - an amalgamation of Bank of Toronto and Dominion Bank), Scotia Bank (old Bank of Nova Scotia) and RBC (Royal Bank of Canada)).

The lasting legacy of previous constraints on US banking is that it has thousands upon thousands of banks all over the place (of which a few hundred went kaputski during the GFC).

European banks are massive and have many fingers in many pies owing to the colonial ties from yesteryear... Standard Chartered - London-based but massive in post-colonial British Asia, Barclays (you can't get more English than them), ABN Amro (now bought out) via the Dutch East Indies and what not etc etc.
 

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70's porn star
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^ that's not the point. as a return on investment it's actually no super profit, as much as we hate the cunz and wish we could destroy them.
 

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Perth
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All I'm saying is if you want votes in Australia ... go after the banks. They are everything that is wrong with western society and capitalism atm.
 

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Overwatch Nexus
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Discussion Starter · #12 ·
Thanks for your indepth answers Tayser, was just what I needed to know. :cheers:
 

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All I'm saying is if you want votes in Australia ... go after the banks. They are everything that is wrong with western society and capitalism atm.
And watch that strategy backfire when the economy turns to shit becuase you're trying to curry up votes by getting your thumb too far up the bank's ass. Love them or hate them, but our economy depends deeply on the big 4, especially after the onset of the GFC. The govts will make angry noises about the banks, but don't expect them to attempt anything that could really hurt the banks.
 

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Melbourne quality poster
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All I'm saying is if you want votes in Australia ... go after the banks. They are everything that is wrong with western society and capitalism atm.
indeed comrade!

how dare a company try to make money!
 

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Perth
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Fine then leave it how it is. The Reserve bank raises interest rates by 25 base points and all the big 4 increase by at lease 40 base points?

And what about when the reserve was cutting interest rates and the big 4 were not passing them on?

Makes it pretty hard for the federal government to employ monetary policy when the big banks are not playing by the rules.

And Sanj your comment can apply to any company tax or regulation ... a bit generic even for you brah!
 

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That's not how banks work.

Nowhere in any rule does it say the banks need to set their interest rates in reference with the cash rate. Nor is it implied, nor is there a gentleman's agreement, nor were there pinkie swears or spit shakes. Just because the tabloids say so, doesn't make it true.

It doesn't interfere with monetary policy. The RBA get a lot of monthly data about the inner workings of the banks (through APRA) and knew about their internal cost of funds. Besides, CBA were basically shouting from the rooftops before the board meeting anyway.

Banks are the wheels that grease the capitalist economy. When banks cut lending, the economy suffers. When people lose confidence in the banks, the economy suffers. Our strong banking system was a big factor in keeping the financial crisis out of Australia.

If you have a super fund you probably are a shareholder in at least one of the big four.
 

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It's the tall poppy syndrome all over again, except in this case the banks are owned by the people (public companies) so therefore, people want to cut their own noses to spite their face. Obviously this system is working relatively well because the money goes back into the economy. Banks fund investment, pay thousands of employees, distribute dividends, donate money, keep all businesses in business, assist in the flow of money and yet, people want to cut them down?
The government needs to be careful when dealing with the banks, and talk of super profit taxes makes me nervous. I was always told by a very wise economist, "it doesn't matter who's in power, it's big business that runs the country".

I just thought of another analogy. "Don't bite the hand that feeds you!"
 

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The trains are coming
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I thought the market would already sort out all the 'super profit' companies anyway, and their share price would trade at about the same level of return as every other industry?

You don't hear a 'super supermarket tax' now do you? Even though Woolies and Coles basically trade as a duopoly and their share price is hyper-inflated on account of charging way more than they could / should for basic items... then again that would really hurt the Aussie main street and would massively unpopular, and at the end of the day its all about winning important votes in a hung parliament situation...?
 

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Was having a conversation last night, and wasn't sure of the answer. Does anyone know the difference between the Reserve Bank of Australia, APRA and the US Federal Reserve? Do they perform the same functions in relation to banking?

The statement that was made was that the US has no equivalent of APRA, ie the banking system in the US is not monitored/regulated at all by the govornment, where as ours is.. It didn't sound right.
The regulation in the US is a lot more fragmented, there isn't a single authority equivalent to APRA. Different financial institutions are regulated by different authorities.
 

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70's porn star
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The Greens really did demonstrate how fkt up they would be at running the country. Other than knowing where the whales are swimming at any given point in time, and how to plant some trees, those cunz know jack shit and would destroy the country. And there wouldn't be enough flowers to put in our hair because all the florists will have gone bust.

Saying that the banks should be forced to align with official interest rates is just plain and simply fkn stupid. It's also way too "big government" for my liking. And that's what the Greens are about "Big Government", or moreso "Green Communism". Seriously.

I do feel that banks should be regulated in how they lend money though. It is the extreme debt that they have allowed to occur that will sink the western world for decades. They should only be allowed to lend 70-80% of the value of, say, a property, and only to those that can fully demonstrate that they have the ability to repay.

ie, it is risk that should be regulated further not rates. Prudent savers should not be punished, actually, they should be encouraged. If anyone can't pay a loan off at a slightly higher than average rate, let alone the slightly lower than average rate we have, then it's just too bad that they got themselves into this mess.
 
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