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Market Structure Followed by Australian Banking Industry

Question :

The report tends to cover the detailed study of the suitable structure of the Australian banking industry which is undertaken as effective assessing to its levels for the competitiveness. For this, the banking sector is the subject to competition from non-bank financial intermediaries which depict as the market for banking services and also undertake the overall market structure of the Australian banking sector.

  • Which type of market structure is followed by the Australian Banking Industry?
  • How many banks are included in Australian banking structure?
Answer :

In Australia, an oligopoly market structure is quite usual because the maximum service sector is like retail and banking who tends to follow the oligopoly market structure. In regard of this, the banking industry of Australia is the perfect example of oligopoly which undertake the main features of oligopoly market structure who tends to follow the suitable type of market and other firms who tends to operate as the sole authority within the market. As in terms of monopoly, there is only one seller who tends to rule and overpower the whole market and business effectively. For this, monopolistic competition tends to undertake firm who compete effectively within the sector as they do not permit other companies to take entry in the market. The Australian banking industry has the objective of long term success to the effective commitment by considering the interest of their clients as it tends to increase capital for new ventures and also helps in meeting growth objectives in terms of expanding their business. Furthermore, the global private equity partners tend to offer wealth management, mergers and acquisition, risk and research, restructuring of the unrivalled strength and scale.

Along with this, to take entry in banking sector is quite difficult as the huge capital investment is required and four major banks of Australia tends to operate in mutual manner and shareholders regarding the investment which is quite fruitful. Along with this, the banking industry is also remained effective for the institutional group for the financial system and leads to retain suitable market share. For this, the banking sector is the subject to competition from the non-bank financial intermediaries which means that the market of banking is not considered as isolation from the broader market for the financial services. Apart from this, the Australian banking industry has gone through various changes over the two decades which is being triggered for the period of financial deregulation. In regard of this, they also tends to focus on the changing institutional structure as some of the factors tends to shape effective evolution. Moreover, to assess the competitive structure which has emerged as for the, committee tends to took suitable factors into consideration to the extent for the expectations of deregulations. Along with this, the structure and performance of banks are also essential as they tends to make sure that they leads to act effectively.

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For this, Australia is the market who is majorly dominated by the banks regarding threatening of competition. For this, the performance of the dominating banks leads to show profitability as in return of assets as compared to the international banks in the market. Along with this, the structure of Australian banking sector is oligopoly which is being dominated by four major banks including Commonwealth bank (CBA), National Australian Bank (NAB), ANZ and Westpac in terms of representing 76% of the market and accounting for 82% of the lending and around 78% of all the bank deposit which are made in the sector. The suitable structure tends to perform fairly and leads to decrease the amount of effective competition evident within the market and the overall performance leads to dominate bank that tends to enhance the profitability and return of assets. Furthermore, the suitable form of economic competition has both the negative and positive factors and undertake oligopolistic competition within the banking sector. Because of the competitiveness, the four banks tends to grabbed for the overall market share as no other banks are existed.

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For this, no fraudulence cases tends to occur as these are the prominent banks which are being trustable. Along with this, money transactions are done from the well known banks that does not leads to create any sort of mess. Hence, in banking sector people tends to enjoy very fast services and also being monopolistic entity as the authority charges high price which is not so affordable for the citizens. It also tends to create difficulty for others and because of the shortage of suitable options people need to go for the current opportunities. Despite from this, banks plays an important role for the Australian financial system in order to hold majority of financial system assets as most of the banks are being involved in other facets for the financial intermediation undertaking the business banking, trading in financial markets, insurance and funds management. It also leads to depict the strong growth for the assets of banking system that has been occurred at the same time and for this, banking system leads to become more reliant on wholesale funding.

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Furthermore, Australian banks also tends to owned their banking groups regarding the funds and insurance management operations that leads to earn a larger share of profit from the prominent activities instead of banking. Hence, the financial market trading and lending activities are accounted for the remainder. So, the market structure of Australian banking sector is quite effective with the objective of acquire more and more market area.

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