deposit growth; mounting political and public pressure to cut interest rates on loans; and associated costs of adopting regulatory reforms and new developments in technology. Structure of Australian Financial Services Industry Australian financial institutions can be broadly categorized into five: Authorised Deposit Taking Institutions (ADIs); Registered Financial Corporations (RFCs); Life Offices and Superannuation Funds; Other Managed Funds; and Other Financial Institutions. Table 1 shows the type of financial institutions under each category (Reserve Bank of Australia [RBA], 2012a).
The data in Table 1 indicates ADIs holding the largest proportion of assets with banks dominating with about 59.5
percent of the assets in that group. The assets of Australia’s four major banks constitute about 70 percent of the total assets of banks (Australian Trade
Commission 2012). Life Offices and Superannuation Funds follow with a total asset size of 24.11 percent. Figure 1
depicts the dominant asset share of banks and superannuation funds, which together hold 79.44 percent of the assets in the sector (RBA 2012a). The asset of these two institutions experienced a decline between 2007 and 2008 during the Global Financial Crisis (GFC). This was attributed to changes in consumer expenditure behaviour brought about by a climate of uncertainty during the crisis which led to a 30 year low in the demand for loans and an increase in household savings (Lowe 2012). The asset of banks declined from a peak of $2.67 trillion in 2008 to $2.5 trillion in December 2009, and has since been experiencing a slow growth. Whereas, the asset size of funds
declined from $826 billion in 2007 to $710 billion in 2008. Figure 3 shows the impact of the GFC on the assets of the financial institutions (RBA 2012a). While the assets of banks and superannuation funds have picked up growth from 2009 and 2008, respectively, all other financial institutions have been experiencing a steady decline in their asset size from 2008 onward. Legal and Regulatory Framework of...