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Australia's banking sector is dominated by the Big Four banks, which include ANZ Bank, Westpac, NAB, and the Commonwealth Bank. The Commonwealth Bank was fully privatized between 1991 and 1996, marking the end of the Australian government's direct ownership of banks. Today, Australian banks can be categorized into customer-owned banks, medium banks, and subsidiaries of large foreign banks. Customer-owned banks, such as Bank Australia, prioritize the interests of their customers and focus on areas like climate action and affordable housing. Medium banks include regional banks like the Bendigo and Adelaide Bank, while subsidiaries of foreign banks include ING Australia and HSBC Bank Australia. The Reserve Bank of Australia, the country's central bank, is wholly owned by the Commonwealth of Australia and is responsible for conducting monetary policy and issuing the nation's currency.
| Characteristics | Values |
|---|---|
| Australian government's direct ownership of banks | Ceased with the privatisation of the Commonwealth Bank between 1991 and 1996 |
| Reserve Bank of Australia | Australia's central bank; wholly owned by the Commonwealth of Australia |
| Reserve Bank's role | Conducts the nation's monetary policy, issues its currency, fosters financial system stability, promotes the safety and efficiency of the payment system, and offers banking services to the government |
| Reserve Bank Board | Has up to nine members, three of which are ex officio: the Reserve Bank Governor (Chair), the Deputy Governor (Deputy Chair), and the Secretary to the Treasury |
| Reserve Bank Act 1959 | Separated the Commonwealth Bank into the Reserve Bank of Australia and the Commonwealth Banking Corporation |
| Commonwealth Banking Corporation | Remained publicly owned until its privatisation in 1991 |
| Australian Prudential Regulation Authority | Responsible for prudential supervision of financial institutions |
| Customer-owned banks in Australia | Service 4.6 million customers or 'members' with total assets of over A$138 billion |
| Examples of customer-owned banks | Bank Australia, Great Southern Bank, Heritage Bank, RACQ Bank, Bank First |
| Big Four Australian banks | ANZ, BNZ, NAB, Westpac |
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What You'll Learn
- The Reserve Bank of Australia is wholly owned by the Commonwealth of Australia
- Australian government's direct ownership of banks ceased in the 1990s
- The 'Big Four' Australian banks dominate the New Zealand banking sector
- Customer-owned banks service 4.6 million customers with total assets of over A$138 billion
- The banking industry has seen significant shifts away from branch-based banking
The Reserve Bank of Australia is wholly owned by the Commonwealth of Australia
Australia has a mix of privately-owned banks and customer-owned banks. The Reserve Bank of Australia (RBA) is Australia's central bank and banknote-issuing authority. It has been wholly owned by the Commonwealth of Australia since 14 January 1960, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank.
The RBA's role is to conduct the nation's monetary policy and issue its currency. It also fosters financial system stability and promotes the safety and efficiency of the payments system. The RBA does not provide banking facilities to the general public, but it does provide banking services to the government and some commercial banks and other clients. It does not supervise the prudential soundness of banks or handle consumer complaints about financial institutions.
The RBA Governor is appointed by the Treasurer for a term of up to seven years and is eligible for reappointment at the end of their term. The Governor is the chairman of the Payment Systems Board and the Reserve Bank Board and resolves any disputes that occur between the two boards. The Reserve Bank Board makes monetary policy decisions in terms of the cash rate, which affects a range of market and institutional interest rates.
The RBA's origins can be traced back to the creation of the Commonwealth Bank of Australia in 1911. The Commonwealth Bank was established as a government-owned savings and trading bank. Over time, it acquired more of the responsibilities of a central bank, particularly after the First World War when it was given responsibility for managing the Australian government debt. By the late 1950s, there were concerns that the Commonwealth Bank's dual functions as a central bank and a trading and savings bank gave it an unfair advantage over other banks. The Reserve Bank Act 1959 separated the Commonwealth Bank into two entities: the Reserve Bank of Australia and the Commonwealth Banking Corporation.
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Australian government's direct ownership of banks ceased in the 1990s
The Australian government's direct ownership of banks ended in the 1990s. The Commonwealth Bank, which was established in 1911, served as both a government-owned trading bank and a savings bank. However, in the 1950s, concerns arose about the potential unfair advantage that the Commonwealth Bank held over other trading and savings banks due to its dual functions. As a result, the Reserve Bank Act 1959 separated the Commonwealth Bank into two entities: the Reserve Bank of Australia (RBA) and the Commonwealth Banking Corporation.
The RBA became the nation's independent central bank, responsible for conducting the nation's monetary policy, issuing currency, fostering financial system stability, and promoting the safety and efficiency of the payments system. On the other hand, the Commonwealth Banking Corporation continued to operate as a trading and savings bank. Despite the separation, the Australian government maintained direct ownership of the Commonwealth Banking Corporation.
In the 1990s, the Australian banking industry underwent significant changes. The widespread acceptance of credit cards and the development of SSL encrypted technology in the mid-1990s paved the way for e-commerce. Additionally, the introduction of telephone banking and, later, internet banking in the 1990s, transformed how Australians interacted with their financial institutions. These innovations led to a shift away from traditional bank branches, resulting in branch closures and staff reductions.
During this decade, the Australian government's direct ownership of banks came to an end. Between 1991 and 1996, the Commonwealth Banking Corporation, the last remaining government-owned bank, was fully privatised. This privatisation marked a significant shift in the Australian banking landscape, increasing competition from non-bank lenders, such as providers of securitised home loans. The privatisation also led to the creation of a new category of authorised deposit-taking institutions (ADIs), allowing non-bank financial institutions to accept deposits from customers more formally.
While the RBA is wholly owned by the Commonwealth of Australia, it is not a commercial bank and does not provide banking services to the general public. Instead, it offers banking services to the government and some commercial banks and other clients. The RBA's role is to promote the economic prosperity and welfare of the Australian people and maintain confidence in the nation's currency.
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The 'Big Four' Australian banks dominate the New Zealand banking sector
Australia's "Big Four" banks refer to the four largest banks that have historically dominated Australia's banking industry in terms of market share, revenue, and total assets. These banks are Commonwealth Bank, Westpac, National Australia Bank, and Australia and New Zealand Banking Group (ANZ). These banks have a lengthy history, starting at a local level and gradually increasing their market share by acquiring smaller rivals during financial turmoil. The Australian government's "four pillars policy" has maintained this status quo, even through the 2008-2009 Global Recession.
The Big Four dominate Australia's financial landscape, with combined assets at the end of 2023 worth over $3.85 trillion, more than double the country's economic output. They are counted among the world's largest banks by market capitalisation and rank in the top 25 globally for safety.
The Big Four Australian banks also dominate the New Zealand banking sector. New Zealand has 27 registered banks, with four large Australian-owned banks (ANZ, ASB, BNZ, and Westpac) responsible for 85% of bank lending. In the 2012/2013 financial year, the largest of the Big Banks in New Zealand, ANZ, made a profit of NZ$1.37 billion. The smallest, BNZ, made a profit of NZ$695 million. The profit of New Zealand's next four largest banks is less than 30% of BNZ's profit. The four Australian banks have high credit ratings by international standards and their New Zealand subsidiaries account for between 11% and 17% of their total assets.
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Customer-owned banks service 4.6 million customers with total assets of over A$138 billion
Australia has a sophisticated, competitive, and profitable financial sector. The country's financial services sector is the largest contributor to the national economy, contributing around $140 billion to GDP annually. Banking in Australia is dominated by four major banks: Commonwealth Bank, Westpac, Australia and New Zealand Banking Group, and National Australia Bank. These banks are among the world's largest and safest financial institutions.
In addition to these major banks, there are also several smaller banks and a large number of other financial institutions, such as credit unions, building societies, and mutual banks, which provide limited banking services and are described as authorised deposit-taking institutions (ADIs). Many large foreign banks also have a presence in Australia, but few have a retail banking presence.
One notable aspect of the Australian banking landscape is the presence of customer-owned banks, which are owned and operated by their customers rather than external investors. These banks focus on balancing profit and purpose, and they often prioritise social and environmental causes that are important to their customers, such as climate action, nature and biodiversity, First Nations Recognition and Respect, and affordable housing. Bank Australia, for example, is Australia's first customer-owned bank, established in 2011 through the merger of 71 credit unions and cooperatives.
Collectively, Australian customer-owned banks service 4.6 million customers or 'members', as they are mutual shareholders in the institutions. These customer-owned banks hold total assets of over A$138 billion. The largest customer-owned bank in Australia is Great Southern Bank, which achieved this status after rebranding from Credit Union Australia in June 2021. Previously, Heritage Bank held this distinction.
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The banking industry has seen significant shifts away from branch-based banking
The Australian government's direct ownership of banks ended with the privatisation of the Commonwealth Bank between 1991 and 1996. The Reserve Bank of Australia (RBA) is Australia's central bank and is wholly owned by the Commonwealth of Australia. It does not provide banking services to the general public but does so for the government, commercial banks, and other clients.
The evolution of banking technology has transformed the way customers interact with their banks. Mobile banking apps, for instance, allow customers to check their balances, transfer funds, and pay bills from the convenience of their devices. This shift has resulted in a decrease in foot traffic to traditional bank branches. Additionally, the rise of digital-only banks, also known as neobanks, has further accelerated the move away from branch-based banking. Neobanks operate entirely online without any physical branches, offering customers a fully digital banking experience.
The move away from branch-based banking has also been influenced by changing customer preferences and expectations. Today's customers increasingly value convenience, speed, and accessibility in their banking services. The ability to access their bank accounts and perform transactions anytime, anywhere, has become a priority for many. This shift in preferences has been particularly prominent among younger generations, who are often more comfortable with digital banking solutions and may prefer the ease and efficiency of online banking platforms.
While the shift away from branch-based banking has brought numerous benefits, including increased convenience and accessibility, there are also considerations to be made. One important aspect is ensuring that digital financial services are secure and that customers' money and personal information are protected from cyber threats. Additionally, there may be concerns about the potential negative impact on certain customer groups, such as the elderly or those without reliable internet access, who may face challenges in adapting to digital banking platforms.
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Frequently asked questions
Yes, Australian banks are privately owned. The Australian government's direct ownership of banks ceased with the privatisation of the Commonwealth Bank between 1991 and 1996. The Commonwealth Bank was previously both a central bank and a trading and savings bank, but the two functions were separated in 1959. Today, the Reserve Bank of Australia is the country's central bank and is wholly owned by the Commonwealth of Australia.
Publicly-owned banks are owned by the government and serve the public, whereas privately-owned banks are owned by private investors and are driven by profit.
Yes, there are customer-owned banks in Australia, such as Bank Australia, which was previously known as Bankmecu. These banks are guided by a responsible banking policy and put their customers at the centre of their operations. They aim to balance profit and purpose and make decisions that positively impact people, communities, and the planet.
