FIN111 Lecture Notes - Lecture 4: Non-Bank Financial Institution, Main Source, Securitization
1. Different nonbank financial institutions in Australia.
2. Building societies.
3. Credit unions.
4. Finance companies.
Nonbank financial institutions in Australia:
Include:
• Building societies: specialise in making mortgage loans.
• Credit unions: specialise in short-term consumer loans.
• Finance companies: specialise in making loans to consumers and businesses.
NBFIs
• These institutions are relatively small compared to the big commercial banks that dominate the
Australian financial sector. They are however, more numerous.
• Whilst they hold more than $187 billion in assets, their growth rate of assets has lagged behind
that of the big banks.
Permanent Building Societies:
Building societies have specialised in making consumer mortgage loans, but over time have
developed into more diversified institutions, with a concentration on residential mortgages but also
holding some commercial loans, corporate bonds and other investment securities.
Because building societies focus on long term residential mortgages and fund them with short
term consumer savings deposits, they are exposed to considerable interest rate risk.
• Authorised deposit-taking institutions (ADIs).
• Operated in Australia since the 1850s.
• Regulated by Australia prudential regulation authority (APRA)
• Regulated in the same way as banks.
Sources and uses of funds by building societies:
• Assets: the majority of building society assets are loans and advances (majority being
residential mortgages).
• Liabilities: deposits.
• Capital: traditional building societies are owned by their members. Profits are accumulated,
rather than paid out in dividends, and represent a large portion. Of the capital of the society.
• Income: the main source of income for building societies is interest income (income earned
from deposits with financial institutions, interest from investment securities and interests on
loans and advances made to clients). They also however have noninterest income, derived from
financial planning, charging fees on mortgages and other loans, commissions etc.
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Document Summary
Different nonbank financial institutions in australia, building societies, credit unions, finance companies. Include: building societies: specialise in making mortgage loans, credit unions: specialise in short-term consumer loans, finance companies: specialise in making loans to consumers and businesses. Nbfis: these institutions are relatively small compared to the big commercial banks that dominate the. They are however, more numerous: whilst they hold more than billion in assets, their growth rate of assets has lagged behind that of the big banks. Building societies have specialised in making consumer mortgage loans, but over time have developed into more diversified institutions, with a concentration on residential mortgages but also holding some commercial loans, corporate bonds and other investment securities. Sources and uses of funds by building societies: assets: the majority of building society assets are loans and advances (majority being residential mortgages), liabilities: deposits, capital: traditional building societies are owned by their members.
