MAF202 Lecture Notes - Lecture 2: Overdraft, Financial Institution, Contingent Liability
Document Summary
Banking act 1959 (cwth) authorises a financial institution to operate as a bank. There are three categories of banks: australian owned banks (approx. 30 in 2016: foreign subsidiary banks (7 in 2015, foreign bank branches (approx. In australia the big 4 banks account for 79% of total asset of the banks. Banks help lower the cost of businesses raising funds. Allow efficient allocation of resources hence economic growth. What do banks do: asset management, loans portfolio is tailored to match the available deposit base. Liability management: deposit base and other funding sources are managed to fund loan demand. Sources of funds appear in the balance sheet as either liabilities or shareholder funds. Banks offer a range of deposit and investment products with different mixed of liquidity, return, maturity and cash flow structure to attract the savings of surplus entities. Term deposits: funds held in a cheque account/transaction account, highly liquid, may be interest or non-interest bearing.
