Australias Banking Industry

Australias
Banking Industry
Date: May 2011

Disclaimer
This publication has been prepared as a general overview of the Banking Industry in Australia and does not constitute and is not intended to constitute financial
product advice as defined under the Corporations Act 2001 (Cwth). Nothing in this document should be construed as a recommendation or statement of opinion
intended to influence a person in making an investment decision.
The information is made available on the strict understanding that the Australian Trade Commission (Austrade) is not providing professional advice. While all care
has been taken in the preparation of this publication, Austrade expressly denies liability for any loss or damage of any nature (including but not limited to any errors
or omissions) arising out of or connected with reliance on the contents of this publication. Any person relying on this publication does so entirely at their own risk.
Austrade strongly recommends that the reader obtain independent professional advice prior to making any investment decision.
Austrades role in the promotion of Australian trade includes facilitating engagement by Australian financial services exporters in markets outside Australia. Austrade
is not a promoter of any financial services products or investments and does not provide investment advice. Austrade assumes no responsibility however so arising
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business connected with such products. Investors should always make their own enquiries as to whether an investment is appropriate for their needs and should
consult an independent and licensed advisor.
Contents
Other regulatory agencies
45
Executive Summary
Australias Banking Industry
Market Participants
Overview
46
Banks
Summary of available operating models
46
Australian Credit Licence
46
Credit Unions
11
Available options
46
Building Societies
12
Summary of requirements for each option
47
Non-Deposit-Taking Finance Companies
12
The authorisation and application processes
51
Retail Banking
13
Australian financial services licences
52
Size and Scope
13
Introduction
52
Residential Mortgages
14
What is a financial service?
52
Credit Cards
15
What is a financial product?
52
Margin Lending
16
Retail and wholesale clients
53
Deposits
16
Other considerations
53
Private Wealth
18
Privacy laws
53
Retirement or Superannuation savings
18
Anti-money laundering and similar laws
53
Self-Managed Superannuation Funds
18
New laws to change the way to take security

in Australia
53
Government Reforms Competitive

and Sustainable Banking
19
Taxation 54
21
Summary
54
Scope
21
Taxation of business profits
55
Market Participants
21
Taxation treatment of funding options
55
Commercial Banking and Corporate Finance
Authorised Deposit-taking Institutions
21
When is interest withholding tax payable?
55
Boutique Advisory Firms and Securities Brokers
21
Exemptions from IWT
55
Specialised Finance Companies
21
N
otional borrowing by an Australian branch
of a foreign bank
56
Deductibility of IWT
56
Phasing down Australian IWT for financial institutions
56
Special treatment for offshore banking units
57
Thin capitalisation
57
Commercial Lending
22
Syndicated Debt
25
Project and Infrastructure Finance
26
Trade Finance
28
Corporate Finance and Advisory
30
Mergers and Acquisitions
30
Equity Capital Markets
30
Debt Capital Markets
33
Asset-backed Securities
36
Kangaroo Bonds
37
Over-the-counter and exchange-traded markets
39
Useful Links
58
Appendix A Banking Institutions
59
Appendix B Credit Unions and Building Societies
60
Appendix C Foreign Retail Banks in Australia
62
Appendix D International Expansion of

Australias Largest Banks
64
Appendix E Selected Australian Legal and

Accounting/Tax Advisors in Financial Services
67
Appendix F Infrastructure Australias Reform and

Investment Priorities
68
Transaction Services Payments System
40
Operations Processing
40
Regulation and Tax Environment
44
Regulation of the financial system
44
Overview
44
Appendix G Capital Expenditure in Australias

Mining Sector
70
Australian Prudential Regulation Authority
44
Appendix H Transaction Services Payments System
72
Australian Securities and Investments Commission
45
Regulation
72
Reserve Bank of Australia
45
Payments System Access Points
72
Federal Treasury
45
Payment Settlements
73
Australian Competition and Consumer Commission
45
Future Trends
73
>3
Australia ranked fifth amongst the worlds

leading financial systems and capital markets
in the 2010 World Economic Forum Financial
Development report.
Executive Summary
Australia has a strong, profitable, sophisticated
and well regulated banking sector which is
welcoming of new entrants and increasingly
engaged in regional and global markets.
The financial sector is the largest contributor to Australias national
output, around 11 per cent of Australian output or A$135 billion
of real gross value added in 2010.1
Australia ranked fifth amongst the worlds leading financial
systems and capital markets in the 2010 World Economic Forum
Financial Development report.
Total assets of Australias banks, defined as Authorised Deposittaking Institutions (ADIs)2, were A$2.7 trillion. Australia has four
large domestic banks (the four pillars) that provide full service
retail and commercial lending to the Australian economy;
Australia and New Zealand Bank (ANZ), Commonwealth Bank
of Australia (CBA), National Australia Bank (NAB), and Westpac
Banking Corporation (WBC). Each has a AA rating (Standard &
Poors) with only nine of the top 100 banks globally enjoying a
rating of AA or higher.3
Foreign banks4 are also well represented in the Australian
market with 20 of Forbes top 25 banking institutions having a
presence in Australia. The majority of these foreign competitors
are focused on commercial banking and capital market
activities, although a number are now significant players in the
retail banking market.
Australias retail banking sector is relatively concentrated, with
twenty one banks providing the bulk of banking services to
consumers (12 domestic banks, 9 foreign owned subsidiaries).
Consumer lending in Australia totalled A$1.3 trillion as at October
2010, of which the largest component is mortgage lending.
While the major Australian banks have dominant market shares
across most consumer finance lines, there is also increasing
competition from foreign banks and regional Australian banks
and competition from non-bank lenders (credit unions, building
societies and non-deposit-taking specialist finance companies).
Australias payments system has undergone, and continues
to undergo, change designed to increase competition and
innovation. Australians are early adopters of new technology,
as reflected in the significant growth in electronic payments,
EFTPOS and ATMs in the country.
The commercial banking and corporate finance and advisory
sector incorporates a full range of services provided to
commercial, corporate, government and institutional sectors.
Specialist expertise exists in mining and resources, infrastructure
and project finance (including public-private partnerships),
agriculture, and property.
Competition in this sector includes the major and regional

domestic banks, foreign banks, securities brokerage
companies, specialised corporate advisory firms, and asset
finance companies.
Australias commercial and corporate advisory market comprises:
A$620 billion commercial lending market.

A sizeable syndicated loans market that has raised
US$336 billion over the five years to 2010, equivalent to

2.1 per cent of world issuance.
The second largest project finance market in Asia-Pacific

after India, with US$14.6 billion worth of deals in 2010, or
15 per cent of the regions total.
The second largest free-floating stock market in the
Asia-Pacific region, and sixth largest globally, with a

capitalisation of US$1.1 trillion and 2,072 listed companies.
One of the three largest Mergers and Acquisitions markets

in Asia-Pacific, with announced deals totalling US$132
billion in 2010 and US$528 billion for the five years to
2010; 3.5 per cent of globally announced deals.
The second largest Equity Capital Market in Asia-Pacific

and fifth largest globally, with US$199 billion of equity
issuance over the five years to 2010.
A securitisation market that has resumed growth following

the global financial crisis, with A$19.5 billion in RMBS
issuance in 2010, up from A$9.9 billion in 2008.
A fast growing Kangaroo bond market that has increased

from A$9 billion to A$129 billion bonds outstanding over
the ten years to October 2010 a compound annual
growth rate of 28 per cent.
The worlds seventh largest foreign exchange market
with total FX turnover averaging US$192 billion per day in

April 2010. The US$/A$ pair being the worlds fourth most
traded pair after the Euro, Yen and Pound Sterling.
The Asia-Pacifics second largest pension fund industry after
Japan, at US$1,261 billion in 2010 and, by some measures

the fourth largest globally.
Australias banking sector has sought to leverage the countrys

strengths in natural resources, infrastructure, public-private
partnerships, property and related capital market activities.
Foreign banks operating in Australia have also been attracted
by our reputation for product innovation, advanced capital and
risk management systems, our highly skilled workforce and our
proximity to key regional markets. Decisions have also been
influenced by our political stability, strong rule of law, transparent
and highly regarded regulatory environment, advanced
social and economic infrastructure, and enviable lifestyle.
1. Australian Bureau of Statistics cat no. 5206.0 Australian National Accounts: National Income, Expenditure and Product, Dec 2010 (released 02 Mar 2011), Table 6, Gross
Value Added by Industry, chain volume measured.
2. ADIs include banks, credit unions and building societies.
3. Ranked by The Banker, Top 1000 World Banks 2010, 6 July 2010.
4. Includes foreign banks with locally incorporated subsidiaries, a foreign bank branch licence or representative office.
>5

The financial sector is the largest contributor to Australias national output, generating more than 10 per cent of Australian
output or A$135 billion of real gross value added in 2010.5
As at February 2011, total assets of Australias banks,6 stood at A$2.7 trillion accounting for around 56 per cent of the total
A$4.9 trillion in financial sector assets. This represents a compound annual growth rate (CAGR) of 13 per cent over the
past decade.
Australias Financial Sector Assets September 2010 (A$ Billion)
General Insurance Offices

$134b or 2.7%
Life offices,
Superannuation Funds
& Other Managed Funds
$1,707b or 35.0%
Securitisation Vehicles
$141.6b or 2.9%
Authorised deposit-taking
Institutions
$2,724b or 55.9%
Registered Financial Corporations

$169b or 3.5%
Sources: Reserve Bank of Australia, Statistical Table B1, Assets of Financial Institutions (updated 1 Feb 2011); Austrade
Australia ranks 12th in the world in terms of bank assets as rated by The Banker, Top 1000 World Banks, December 2009.
Among 21 countries surveyed by the Asian Bankers 500, Australia has the third largest pool of bank assets in the region after
Japan and China. Australias total bank assets accounted for around 240 per cent of the countrys nominal GDP, well above
Japan (193), China (178), South Korea (146), India (102), and the regional average (176).
5. Australian Bureau of Statistics cat no. 5206.0 Australian National Accounts: National Income, Expenditure and Product, Dec 2010 (released 02 Mar 2011), Table 6, Gross
Value Added by Industry, chain volume measured.
6. Defined as Authorised Deposit-taking Institutions (ADIs), which includes banks, credit unions and building societies.
6 > Australian Trade Commission
The Asian Banker Top 500 Banks

Rank
Country

Numbers of Banks
in AB500
1 Japan
123
2 China
Total Assets
(US$ Billion)
Regional Market
Share %
9,779.7
35.51
Total Assets %
of GDP
2009 GDP
(US$ Billion)
192.9
5,069
4,985
103
8,853.4
32.14
177.6
3 Australia
14
2,388.6
8.67
240.2
994
4 India
43
1,258.9
4.57
101.8
1,237
5 Korea
13
1,213.5
4.41
145.8
833
18
1,143.0
4.15
542.8
211
Hong Kong
7 Taiwan
8 Singapore
35
958.7
3.48
253.3
379
488.5
1.77
268.1
182
9 Malaysia
17
405.2
1.47
210.0
193
10 Thailand
14
273.0
0.99
103.4
264
195.6
118
11
230.4
0.84
12 Indonesia
New Zealand
27
214.6
0.78
39.8
539
13 Vietnam
19
97.9
0.36
105.1
93
14 Philippines
15
97.6
0.35
60.5
161
15 Pakistan
15
67.0
0.24
41.4
162
16 Bangladesh
17
26.0
0.09
27.5
95
17.1
0.06
40.5
42
18 Macau
14.3
0.05
67.4
21
19 Myanmar
12.0
0.04
35.0
34
20 Brunei
1.8
0.01
17.3
10
8.3
11
17
Sri Lanka
21 Cambodia
TOTAL
500
0.9
27,542.1
0.00
100.00
176.2 15,633
Sources: The Asian Banker 500, Issue 101 October 2010; GDP data was sourced from IMF World Economic Outlook October 2010; Macau GDP was sourced from Statistics
and Census Service Macau; Austrade
Australias four major banks are amongst the worlds 100 largest by assets and are four of only nine global banks with a rating of
AA or higher by Standard & Poors. Moodys rating for the four major Australian banks is Aa2, with stable outlook (18 May 2011).
Worlds 100 Largest Banks Credit Rating
3,000
Assets US$ Billion (as of 31 December 2009)
Australias four major banks
2,500
2,000
1,500
1,000
500
0
AAA
AA
AA-
A+
A-
BBB+ BBB
BBB-
NR
Sources: This chart was sourced from the Reserve Bank of Australia Financial Stability Report March 2009, page 25, Graph 38, and updated with the 2009 data of banks assets
from The Banker 1000 World Banks 2010 and Standard and Poors Credit Ratings (downloaded 27 July 2010) from Bloomberg; Austrade
The top Australian banks are also within the top 25 banking institutions as ranked by Forbes in its April 2010 top 2,000 companies.
7. The Banker, Top 1000 World Banks 2010, 6 July 2010.
>7
The Forbes Worlds Leading Companies
Rank1
Company
Country
Sales
JPMorgan Chase
USA
115.6
11.7
2,032.0
166.2
Bank of America
USA
150.5
6.3
2,223.3
167.6
71.9
Profits
Assets
(US$ Billion)
Market Value
5 ICBC
China
16.3
1,428.5
242.2
Banco Santander
Spain
109.6
12.3
1,438.7
107.1
Wells Fargo
USA
98.6
12.3
1,243.7
141.7
HSBC Holdings
UK
103.7
5.8
2,355.8
178.3
11
BNP Paribas
France
101.1
8.4
2,952.2
86.7
17
China Construction Bank
China
59.2
13.6
1,106.2
184.3
21 Barclays
UK
65.9
15.2
2,223.0
22
Bank of China
China
52.2
9.5
1,016.3
147.0
29
Lloyds Banking Group
UK
106.7
4.6
1,650.8
50.3
34
UniCredit Group
Italy
92.2
5.6
1,438.9
44.0
43
Deutsche Bank
Germany
63.0
6.9
2,150.6
39.8
44
Credit Suisse
Switzerland
50.3
6.1
988.9
53.9
48
BBVA-Banco Bilbao Vizcaya
Spain
49.3
6.0
760.4
48.2
51
Banco Bradesco
Brazil
59.1
4.6
281.4
54.5
52
Banco do Brasil
Brazil
56.1
5.8
406.5
42.8
53
Royal Bank of Canada
Canada
35.4
3.6
608.1
78.2
54
Intesa Sanpaolo
Italy
50.7
3.6
877.7
44.7
59
Commonwealth Bank
Australia
31.8
3.8
500.2
75.1
67
Westpac Banking Group
Australia
31.2
3.0
519.0
71.0
73
Crdit Agricole
France
92.0
1.6
2,227.2
34.4
79
National Australia Bank
Australia
32.5
2.3
574.4
48.8
83
ANZ Banking
Australia
26.9
2.6
420.5
53.7
86
Toronto-Dominion Bank
Canada
23.6
2.9
517.3
55.4
56.2
1. Forbes rank according to an equal weighting of sales, profits, assets and market value.
Sources: Forbes, The Worlds Leading Companies, April 2010; Austrade
Australia is well positioned as a banking centre in the region, with 20 of Forbes top 25 banking institutions having a presence
in Australia.
Australia ranked fifth amongst the worlds 57 leading financial systems and capital markets in the World Economic Forum
Financial Development Report 2010.
In addition to its geographic position in the Asia-Pacific region, close to the worlds fastest growing economies, Australia offers:
A sizeable domestic economy the fourth largest in the Asia-Pacific (after Japan, China and India);
A highly skilled and multilingual workforce where 1.4 million Australians speak an Asian language (equivalent to around onethird of Singapores, and one-fifth of Hong Kongs entire population);
Advanced business and IT infrastructure;

A sophisticated investor base, including the third largest high-net-worth market in the region (after Japan and China);
A stable political and economic environment, and an enviable quality of life;
Strong and efficient regulatory environment and legal institutions; and
Mature and innovative financial markets including:
A leading pension fund market with A$1.3 trillion in funds;
The fourth largest pool of investment fund assets globally with A$1.8 trillion FUM;
The second largest free-floating stock market in the Asia-Pacific with a market capitalisation of US$1.2 trillion;
A fast growing and liquid foreign exchange market having grown 12 per cent CAGR since 1998.
Market Participants
Banks, credit unions and building societies known as Authorised Deposit-taking Institutions (ADIs)
provide the bulk of banking services to Australian households, businesses and governments and
are prudentially regulated by the Australian Prudential Regulation Authority (APRA). Non-deposit
taking finance companies also provide competition in selected consumer credit products.
Banks
Australia has a sound, well capitalised banking sector. Its banks are large by global standards, with a strong retail base, highly
developed wealth management capabilities, and full service commercial, trade finance and corporate advisory operations
reaching out into the region.
There are 56 banks operating in Australia (12 domestic banks, 9 foreign subsidiary banks and 35 foreign branch banks) with
total resident assets of A$2.4 trillion as 30 September 2010.8
Australias banking sector offers opportunities for new entrants providing innovative products and distribution systems.
Australian banks are increasingly looking to export their expertise in retail banking, funds management, private banking and
distribution to the region.
The four major domestic banks have the largest market shares in the retail and commercial banking sectors: the Australia and
New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac
Banking Corporation (WBC). They accounted for 77.49 per cent of resident assets (A$2.4 trillion) as at September 2010.
Other domestic banks accounted for 9.2 per cent, while foreign bank subsidiaries and branches accounted for 13.4 per cent.
The largest of the other domestic retail bank competitors are Suncorp-Metway, Macquarie Bank, Bendigo Adelaide Bank and
Bank of Queensland.
Of the foreign banks with a subsidiary or branch licence, ING, Bank of Scotland, Citigroup, Deutsche Bank and HSBC have the
largest presence as measured by Australian banking assets. ING now ranks fifth in retail banking with its innovative, internet
based model. Rabobank has built a strong regional footprint drawing on its rural heritage and is now looking to widen its scale
of operations. In addition, there are a number of smaller foreign retail banking operations that target specific immigrant groups
including the Arab Bank, Bank of China, Bank of Cyprus and Beirut Hellenic Bank.
8. Apra, Monthly Banking Statistics, September 2010 (issued 29 Oct 2010).

9. Includes Bank of Western Australia Ltd (wholly owned subsidiary of the Commonwealth Bank).
>9
Assets on Australian Books of Individual Banks (A$ Million)
September 2010
Resident Assets
Westpac Banking Corporation
528,148
Commonwealth Bank of Australia
515,805
National Australia Bank Ltd
407,793
Australia and New Zealand Banking Group Ltd
360,592
Four Major Domestic Banks
1,812,338
Bank of Western Australia Ltd1 70,877

Suncorp-Metway Ltd
70,813
Macquarie Bank Ltd
60,560
Bendigo and Adelaide Bank Ltd
41,306
Bank of Queensland Ltd
32,901
AMP Bank Ltd
7,746
Members Equity Bank Pty Ltd
6,255
Rural Bank Ltd

Total Other Domestic Banks
4,126
294,584
ING Bank (Australia) Ltd
46,572
Citigroup Pty Ltd
22,449
HSBC Bank Australia Ltd
17,917
Rabobank Australia Ltd
11,819
Investec Bank (Australia) Ltd
4,580
Bank of Cyprus Australia Ltd
1,483
Arab Bank Australia Ltd
1,363
Beirut Hellenic Bank Ltd
950
Bank of China (Australia) Ltd
472
Total Foreign-owned Bank Subsidiaries
107,605
Bank of Scotland plc
25,211
Citibank, N.A.
22,402
Deutsche Bank Aktiengessellschaft
20,819
UBS AG
16,617
JPMorgan Chase Bank, National Association
15,057
BNP Paribas
14,452
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
13,046
The Royal Bank of Scotland Plc
11,828
The Bank of Tokyo-Mitsubishi UFJ, Ltd
8,684
The Hongkong and Shanghai Banking Corporation Ltd
8,368
Top 10 Foreign-owned Bank Branches
156,484
Other Foreign-owned Bank Branches
62,878
Total Foreign-owned Bank Branches
219,362
Total 2,433,889
1. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia.
Sources: Australian Prudential Regulation Authority, Monthly Banking Statistics, September 2010 (issued 29 October 2010), Table 1; Austrade
Credit Unions
Credit unions operate predominately in the retail sector with business driven by deposit taking, consumer credit and housing
loan finance. There is also a small proportion of commercially focussed business targeted at small and medium-sized
enterprises (SMEs).10 Many credit unions also distribute products in areas such as health insurance, travel and managed funds
as a means of providing greater member value.
Australias 107 credit unions had total assets as at September 2010 of A$50.6 billion, which represented an increase of 8 per
cent over the year.11 This growth was driven predominantly by housing loans, which account for A$33.9 billion (up more than
8.5 per cent over the same period).
There are approximately 900 credit union branches around Australia, although New South Wales is home to the bulk of these
with 43.3 per cent of all branches. Queensland accounts for the second largest number, with 17 per cent of credit union
branches, followed by Victoria with 15.7 per cent.12
The level of concentration in the credit union sector is significant, with the top five credit unions Credit Union Australia
Limited, Australian Central Credit Union, Savings & Loans Credit Union (SA) Limited, Police and Nurses Credit Society, and
NSW Teachers Credit Union holding an estimated 42.5 per cent of market share in terms of total industry revenue and 41.8
per cent of total industry assets.13
The credit union sector is going through a period of consolidation and has seen a number of mergers and acquisitions over
the last five years, driven by the need to achieve further cost savings through economies of scale. The sector has a diverse
range of small and large organisations with the largest credit union having in excess of 400,000 members and around
A$7.5 billion in assets.
Top 5 Credit Unions

Market Share
(% of Revenue)
Assets 2008-09
(A$ Million)
Credit Union Australia Ltd
19.0
7,690
Australian Central Credit Union Ltd
7.0
2,595
Savings & Loans Credit Union (SA) Ltd
7.0
3,230
Police and Nurses Credit Society
5.0
2,403
NSW Teachers Credit Union
4.5
2,893
Sources: Annual Reports, IBISWorld Industry Report K7323, Credit Unions in Australia, November 2010, page 23
A list of Australian authorised credit unions as at August 2010 is provided in Appendix B. More information on this sector is
available through ABACUS, the peak body representing mutual financial institutions, at www.abacus.org.au.
10. IBISWorld estimates that approximately 4 per cent of Credit Union business is with the commercial sector. IBISWorld Industry Report K7323, Credit Unions in Australia,
November 2010.
11. APRA, Quarterly Credit Union and Building Society Performance, September 2010 (issued 30 November 2010).
12. IBISWorld Industry Report K7323, Credit Unions in Australia, August 2010, page 16.
13. Ibid, page 23.
> 11
Building Societies
Australias 11 building societies had total assets as at September 2010 of A$24.6 billion, which represented an increase of 8.7
per cent over the year.14 This growth was driven predominantly by housing loans, which account for A$16.5 billion (up 9.9 per
cent over the same period).
Similarly to credit unions, the bulk of building society business is in the retail sector, with less than 10 per cent of their activities
estimated to be in the commercial sector.15
Building societies tend to target their financing in niche and rural markets that are not adequately covered by the banks.16
They are predominantly located in NSW and Queensland, which are home to an estimated 86 per cent of the industrys
establishments.
The level of concentration in the building society sector is high, with the top four having around 80 per cent of industry revenue
and over 95 per cent of industry assets.17
Top 4 Building Societies

Market Share
(% of Revenue)
Assets 2008-09
(A$ Million)
Heritage Building Society Limited
25.0
7,114
Newcastle Permanent Building Society
22.0
6,303
Illawarra Mutual Building (IMB) Society
17.0
4,444
Greater Building Society
15.4
4,106
Source: Annual Reports, IBISWorld Industry Report K7322, Building Societies in Australia, August 2010, page 21
A list of Australian authorised building societies as at August 2010 is provided in Appendix B. More information on this sector is
available through ABACUS, the peak body representing mutual financial institutions, at www.abacus.org.au.
Non-Deposit-Taking Finance Companies

Non-deposit-taking finance companies represent another significant group of institutions that service the retail banking sector
in Australia. These institutions do not take deposits but have traditionally provided strong competition in consumer lending,
such as mortgage lending, credit cards, and asset or lease financing (i.e., motor vehicles, computers, furniture).
Examples of non-deposit-taking finance companies in Australia include GE Money, Liberty Financial, Resi, La Trobe Financial
Services, AIMS Financial Group, Assured Home Loans, Rate Busters and Home Star.
As these institutions do not take deposits, they are not required to hold a banking license. However, once they reach a certain
size (total assets exceeding A$5 million), they are generally required to register as a registered finance corporation, for the
purposes of the Financial Sector (Collection of Data) Act, 2001. Further information, including a list of registered financial
corporations, is available from the APRA website at http://www.apra.gov.au/RFC/Registered-Financial-Corporations.cfm.
More information on this sector is available through the Australian Finance Conference at www.afc.asn.au, and the Australian
Equipment Lessors Association, at www.aela.asn.au.
14. APRA, Quarterly Credit Union and Building Society Performance, September 2010 (issued 30 November 2010).
15. IBISWorld Industry Report K7322, Building Societies in Australia, August 2010.
16. IBISWorld Industry Report K7322, Building Societies in Australia, August 2010.
17. Ibid.
18. APRA website at www.apra.gov.au/ADI/ADIList.cfm#AOBC
Retail Banking
Size and Scope
Consumer lending in Australia has continued to grow rapidly over the past decade, at a compound annual growth rate (CAGR)
of 12.6 per cent although in more recent years this growth rate has slowed to single digits. As at October 2010, total housing
and other personal credit from Australias financial intermediaries reached A$1.3 trillion. House lending for owner occupiers and
investors accounted for 89 per cent of total consumer credit outstanding.
Australias Consumer Credit (Incl. Securitisation) Year End, A$ Billion
1,400
1,200
Mortgage Owner-occupier (13.5%)

Mortgage Investor (13.4%)
Other personal (7.2%)
A$ Billion
1,000
800
600
400
200
0
Oct-2000 Dec-2000
Dec-2001
Dec-2002
Dec-2003 Dec-2004 Dec-2005
Dec-2006
Dec-2007
Dec-2008
Dec-2009 Oct-2010
Year End
Note: The number in the brackets represents compound annual growth rate since 2000.
Sources: Reserve Bank of Australia, Statistical Table D2 Lending and Credit Aggregates (Last updated 30 Nov 2010); Austrade
Banks provide the majority of credit to Australian households with a market share of 83 per cent, representing almost
A$1.1 trillion as at September 2010. Banks providing deposit-taking services to the household sector are required to be locally
incorporated and are prudentially regulated by APRA. There are 12 domestic banks and nine foreign bank subsidiaries in
Australia see Appendix A for full list of banks.
The table following provides an overview of household loans held by banks as at 30 September 2010. Consumer lending in
Australia, defined as loans and advances to households, accounted for 70 per cent of total bank loans and advances. The four
major banks accounted for 87 per cent of all household loans, while the other domestic banks accounted for 7.6 per cent, and
foreign bank subsidiaries held 5.4 per cent.
> 13
Loans and Advances to Household on Australian Books of Individual Banks (A$ Million)

September 2010
Housing:
Owner-occupied
Housing:
Investment
Households
Credit
Cards
Other
Total
184,755
82,190
9,397
15,403
291,745
169,375
79,166
8,566
9,754
266,861
National Australia Bank Limited
101,098
49,607
5,101
17,900
173,706
107,614
41,207
7,965
13,806
170,592
562,842
252,170
31,029
56,863
902,904
Bank of Western Australia Ltd1
29,993
8,199 1,260
Suncorp-Metway Ltd
18,304
8,099
569 40,021
670
27,079
12,028
6,792
267
2,516
21,603
9,455
7,862
315
17,632
Macquarie Bank Ltd
1,167
585
359
4,520
6,631
AMP Bank Ltd
3,830
1,418
417
5,665
2,978
769
137
144
4,028
77,755
33,724
2,029
9,151
122,659
27,458
9,240
36,698
Citigroup Pty Ltd
4,785
2,442
4,586
1,133
12,946
2,910
3,199
991
162
7,262
126
116
143
385
208
141
357
167
46
141
354
122
222
345
189
23
212
16
16
35,981
15,429
5,577
1,588
58,575

TOTAL
676,593
301,341
38,635
67,653 1,084,222

Residential Mortgages
The residential mortgage market in Australia is by far the largest category of loans to households, representing 90 per cent
of all bank lending to the household sector. Since 2000, bank mortgage loans for owner-occupied and investment properties
have increased much faster (13.5 per cent p.a) than other consumer credit (7.2 per cent p.a.).
Australian laws place full recourse lending to residential mortgages in Australia at a national level. This has provided
homogeneity across the national mortgage market and places greater responsibility for the loan on the borrower than has
been the case in some overseas jurisdictions.
Australias market is characterised by high levels of Lenders Mortgage Insurance. This is an additional charge, borne by the
lender and often passed on to the borrower, which serves to meet any shortfall arising between the proceeds from foreclosure
on the collateral (e.g., residential property) and the loan amount. Typically, lenders require such insurance where the borrowers
loan to valuation ratio exceeds 80 per cent.
Tax laws are favourable towards residential property ownership, with capital gains tax exempt for owner occupiers and
discounts of up to 50 per cent available for investors who own for periods greater than 12 months.19 Investors can also offset
the interest expenses and property costs against their income, including other income sources. If their property expenses
exceed their property income, these expenses can be negatively geared against other personal income sources.
19. Australian Taxation Office http://www.ato.gov.au/
Credit Cards
The credit card market in Australia has grown steadily over the past decade in terms of number of accounts, transactions and
balances outstanding. As at October 2010, there were 14.7 million credit card accounts in Australia, the equivalent of 87 per
cent of Australias adult population, with a total balance outstanding of A$48 billion.20 The average outstanding balance is
around A$3,200.
Australias Credit and Charge Card Statistics (Values and Number, Not Seasonally Adjusted)
16
60,000
14
50,000
12
A$ Million
40,000
10
Number of Accounts ('000, RHS)
30,000
Number, millions
In July 2010, regulatory oversight for consumer credit protection laws was transferred from the state governments to the
federal government under the National Consumer Credit Protection Act 2009. The Act largely replicates the previous statebased Uniform Consumer Credit Code (UCCC). These laws are designed to protect Australian consumers from predatory
or unscrupulous lending practices. The emphasis is placed on the provider to ensure that the borrower has the capacity to
borrow, is properly informed of their responsibilities and that loans are not written in an unfair or misleading manner. Under
these laws, the provider is to access the borrowers capacity to repay; all the repayments, fees and charges associated with
the credit provided (including a change in repayments due to the ending of a honeymoon interest rate period). For further
information see Regulatory and Tax Environment section.
20,000
4
Balances Outstanding (A$ Million, LHS)
10,000
Sep-20010
Mar-20010
Sep-2009
Mar-2009
Sep-2008
Mar-2008
Sep-2007
Mar-2007
Sep-2006
Mar-2006
Sep-2005
Mar-2005
Sep-2004
Mar-2004
Sep-2003
Mar-2003
Sep-2002
Mar-2002
Sep-2001
Mar-2001
Sep-2000
0
Mar-2000
Sources: Reserve Bank of Australia, Statistical Table C1 Credit and Charge Card Statistics (Last updated 30 Nov 2010); Austrade
Credit cards are provided by domestic and foreign banks, credit unions, building societies and some specialised credit card
providers. In recent years, some banks have provided white labelling services to other mass market channels such as retailers
and airlines. Many of Australias largest retailers, such as Coles, David Jones, Harvey Norman, Myer and Woolworths have
credit card offers.
Within the banks, the four major banks account for 83.6 per cent21 of total bank credit card loans outstanding, while other
domestic banks account for 1.6 per cent, and foreign banks, 14.4 per cent.22 The foreign bank share of the credit card market
is dominated by two institutions, Citigroup and HSBC, with Citigroup having the bulk of credit card loans outstanding (around
12 per cent market share), the fifth largest provider after the major domestic banks.
20. Reserve Bank of Australia, Statistical Table C1, Credit and Charge Card Statistics as at October 2010.
22. Australian Prudential Regulation Authority, Monthly Banking Statistics, September 2010 (issued 29 October 2010), Table 2.
> 15
Margin Lending
Margin lending has developed as another consumer credit product over the past two decades. Margin lending is borrowing to
invest in financial securities typically listed shares or managed funds. Each individual security can be leveraged up to a set
loan to value ratio (LVR). If the securities move outside of the allowed valuation limit, borrowers are issued a margin call that
requires them to either add cash to their margin account or to sell down existing securities to bring the loan back under the
LVR limit.
Over the ten years to September 2010, balances outstanding on margin loans grew at 10 per cent (CAGR) to A$17.8 billion.
Growth was rapid during the seven years to 2007, but reduced following the global financial crisis. Today, there are 205,000
client accounts. Quarterly statistics published by the Reserve Bank of Australia indicate that the average loan to security
valuation is 37.5 per cent, with a mean loan size of A$91,000.
Australias Margin Lending (September each year)
250,000
40
Number of Accounts
35
Margin Lending Credit Outstanding (A$ Billion)
200,000
30
25
150,000
20
100,000
15
10
50,000
5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sources: Reserve Bank of Australia, Statistical Table D10; Austrade
Deposits
As at September 2010, total deposits23 (retail and corporate/wholesale) held by banks, credit unions and building societies
were A$1,485 billion, significantly up from A$780 billion five years ago. This represents a compound annual growth rate of
13.7 per cent since September 2005. Banks account for 95 per cent of these deposits.
The following table provides an overview of household deposits held by banks24 as at 30 September 2010. Deposits sourced
from households amounted to $477.8 billion and accounted for 37 per cent of total bank deposits, with the remainder sourced
from businesses, governments and institutions. The four major banks accounted for 78.725 per cent of all deposits, while the
other domestic banks accounted for 10.4 per cent and foreign banks26 11.0 per cent.
23. Reserve Bank of Australia, statistical tables B3, B7 and B8.

24. The domestic books of a bank has the following scope: includes operations/transactions booked or recorded inside Australia; does not consolidate Australian or offshore
controlled entities; includes transactions of Australian-based offshore banking units; excludes transactions of overseas-based offshore banking units; excludes offshore
branches; and excludes transactions, assets and liabilities with offshore.
26. Includes foreign owned subsidiary and foreign branch licenced banks.
Deposits on Australian Books of Individual Banks (A$ Million)
September 2010
Households
Total Deposits
130,008
288,559
113,058
276,907
64,865
216,748
66,840
194,527
374,771
976,741

14,349 42,622
17,265
33,417
Suncorp-Metway Ltd
14,680
32,390
Macquarie Bank Ltd
7,015
29,929
14,896
27,232
1,271
4,186
Rural Bank Ltd
1,320
3,485
AMP Bank Ltd
1,254
3,524
72,050
176,785
17,095
27,624
3,876
12,146
Citigroup Pty Ltd
6,256
7,670
1,830
4,966
242
2,370
377
1,170
459
980
491 780
309
311
30,935
58,017
BNP Paribas
12,778
Citibank, N.A.
6,766
6,608
5,586
4,426
3,794
3,541
Sumitomo Mitsui Banking Corporation
3,440
The Northern Trust Company
3,095
Mizuho Corporate Bank, Ltd
2,696
52,730
59
31,247
59
83,977

TOTAL
477,815 1,295,518

> 17
Private Wealth
Private wealth is a key driver of retail deposit demand. Australias private wealth market now ranks among the largest and
fastest growing in the world. Since 1990, Australias total private sector wealth (including consumer durables, dwellings,
deposits, shares and other equities, and reserves of life offices and pension funds) grew by 8.3 per cent per annum to
A$6.7 trillion.27
Australia was the third largest high net worth individual (HNWI) market in the Asia-Pacific region and the 10th largest in the
world in 2009.28 The number of HNWI in Australia, defined as persons with greater than US$1 million in investable assets,
grew 34.4 per cent to reach 173,600, as at December 2009. Australia had almost 6 per cent of the regions HNWI population,
accounting for 5.4 per cent of the regions total wealth, with a combined value of US$519 billion.
See Austrades publication on the Private Banking Industry in Australia
http://www.austrade.gov.au/ArticleDocuments/2792/Private-Banking-in-Australia-Publication.pdf.aspx
Retirement or Superannuation savings
In addition to voluntary savings, Australia has a mandatory retirement or superannuation savings regime which requires
9 per cent of income to be deposited in superannuation accounts which, generally speaking, can only be accessed their
preservation age. Recently, the Government foreshadowed its intention to introduce legislation to gradually increase the
compulsory level of superannuation savings to 12 per cent by 2019-20.29
The pool of investment fund assets (including mandatory pension, self-managed superannuation and other investment
assets) stands at A$1.8 trillion, which by some measures is the fourth largest pool of savings globally.30 The majority of these
superannuation savings are managed by trustees of APRA-regulated superannuation funds and invested at arms-length by
professional investment managers.
See Austrades publication on the Investment Management Industry in Australia
http://www.austrade.gov.au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia.pdf.aspx
Self-Managed Superannuation Funds
Self-Managed Superannuation Funds (SMSFs) are a superannuation fund managed by the members themselves as trustees
of the fund. Each SMSF can have up to four members, where all members are required to be trustees. Statistics released by the
Australian Prudential Regulation Authority in December 2010 show that the number of SMSFs grew from 412,560 to 439,397 over
the past 12 months. SMSFs now hold A$420.6 billion, or 32 per cent of the nations A$1.3 trillion superannuation pool.
The latest Multiport SMSF Investment Patterns Survey October 2010 revealed that SMSF members allocated 21.8 per cent of
their assets to cash and short-term deposits in September 2010.
27. Private wealth is defined as the sum of household dwellings, household consumer durables (including market values of motor vehicles, furnishings and other household
equipment), and household and unincorporated enterprises financial assets (including deposits, assets of life offices, superannuation funds and friendly societies, shares
and other equity, unfunded superannuation claims and all other). Data sourced from Reserve Bank of Australia, Statistical Table B20.
28. Merrill Lynch Capgemini, World Wealth Report 2010 and Asia-Pacific Wealth Report 2010. See also Austrades data alert http://www.austrade.gov.au/
ArticleDocuments/2792/Data-Alert-101013-Asia-Pacific-Wealth-Report.pdf.aspx
29. See the Australian Governments A tax plan for our future http://www.futuretax.gov.au/pages/FairerSuperannuation.aspx
30. See Austrades publication Investment Management Industry in Australia http://www.austrade.gov.au/ArticleDocuments/2792/Investment-Management-Industry-inAustralia.pdf.aspx
Superannuation Industry in Australia

Assets (A$ Billion)
Jun 2009
Jun 2010
Number of Entities
Jun 2009
Jun 2010
By fund type
Corporate
54.0 56.2 190 168
Industry
191.8 225.5
67
65
Public Sector
153.0
40
39
175.3
Retail
304.7 339.0 166
154
Sub Total
703.5
795.9
463
426
69.7
79.1
82
79
Small APRA funds
2.0
1.6
4,277
3,869
Single-member ADFs
0.1
0.0
112
103
Pooled Superannuation Trusts
Self-managed Super Funds

a
Balance of Life Office Statutory Funds

Totalb
334.2 390.8 401,929 428,198

35.5
38.9
1,075.3 1,227.2 406,863 432,675
a. Estimated data on self-managed superannuation funds are provided by the Australian Taxation Office (ATO).
b. Total assets does not include pooled superannuation trusts.

Sources: Australian Prudential Regulation Authority Statistics, Quarterly Superannuation Performance, June 2010 (issued 9 September 2010); Austrade

Government Reforms: Competitive and Sustainable Banking

In December 2010, the Australian Government announced three broad streams of reform across the Australian banking
system, titled Competitive and Sustainable Banking System.
Stream One: Empower consumers to get a better deal.

Stream Two: Support smaller lenders to compete with big banks.
Stream Three: Secure the long-term safety and sustainability of our financial system.
These reforms are aimed at boosting consumer flexibility to transfer deposits and mortgages; banning exit fees on new
home loans; empowering the Australian Competition and Consumer Commission (ACCC) to prosecute anti-competitive price
signalling; and a community awareness and education campaign.
The Government will also introduce a new official Government Protected Deposits symbol for ADIs, regulated by APRA, to
help consumers identify that their deposits, up to a certain cap, have the protection of the Financial Claims Scheme (FCS) in
the unlikely event that the entity is wound up. The FCS, which was introduced in October 2008, is to be made a permanent
feature of the Australian financial architecture and the Government has been working with the Council of Financial Regulators
to determine an appropriate cap to apply from October 2011 onwards. The current cap is A$1 million per depositor per ADI.
Funding sources will be supported through additional Government investments in high quality AAA-rated Residential Mortgage
Backed Securities (RMBS). This is a further A$4 billion investment, taking the total Government support to RMBS since the
financial crisis to A$20 billion. The Government has tasked the Treasury to design bullet RMBS structures and will amend the
Banking Act 1959 to allow Australian banks, credit unions and building societies to issue covered bonds.
Full details of the Governments announced banking reforms are available from the Treasury website:
http://www.treasury.gov.au/banking/content/_downloads/competitive_and_sustainable_banking.pdf
> 19
Commercial Banking and Corporate Finance

Scope
Services to the commercial sector can be segregated into a number of core markets:31
Commercial Lending Intermediated lending to SMEs, large corporates, institutions and government;
Corporate Finance and Advisory:
Mergers and Acquisitions M&A, demergers and other advisory;
Equity Capital Markets Initial public offerings (IPOs), secondary raisings, underwriting; and
Debt Capital Markets corporate, government and institutional bonds, structured finance securitisation, syndicated
loans and project finance.
Australias commercial and corporate advisory sectors are known for specialised expertise in particular industries including
energy, mining and resources, infrastructure and project finance, agriculture, and real estate.
Market Participants
Authorised Deposit-taking Institutions
There are 56 banks licensed to service wholesale clients in Australia and a further 16 banks with representative offices. Nine
foreign banks operate with a subsidiary license, and a further 35 as a foreign bank branch. In addition, there is a growing
number of emerging market banks that have entered Australia, particularly from China and India, primarily focused on servicing
their corporate clients in Australia, as well as Australian companies interested in entering their markets. A list of authorised
banking institutions in Australia is provided in Appendix A.32
There has been a re-alignment of foreign bank operations in Australia following the global financial crisis changes in Australia
largely reflect outcomes of parent banks. Leading houses such as Citibank, Deutsche Bank, HSBC, JPMorgan, Royal Bank of
Scotland, UBS, and others have a substantial commercial banking presence here.
Boutique Advisory Firms and Securities Brokers
Corporate advisory firms and small specialist finance companies provide competition in niche areas such as mergers and
acquisitions advisory. Included in this category are the larger accounting firms that have a corporate advisory arm, as well
as a range of smaller specialist boutique firms, including: Moelis & Company, Palladio Partners, Gresham Partners, Caliburn
Partnership and BKK Partners. Securities brokers or stockbrokers are generally categorised as either institutional or retail. Many
of these firms provide auxiliary services in capital market financing.
Specialised Finance Companies
As in the consumer lending area, non-deposit-taking specialised finance companies provide an alternative source of financing
for corporations and institutions. Such institutions include asset finance and leasing companies, vendor finance companies,
factoring or inventory finance companies and specialised trade finance companies.
This sector was significantly affected by the financial crisis due to its dependence on wholesale markets and securitisation to
fund its activities. In addition, the Australian operations of a number of foreign owned institutions were hit hard by effects in
their home markets.
31. Many foreign banks providing commercial banking and corporate advisory services are also active in investment and asset management.
This sector is covered in Austrades Investment Management Industry in Australia publication, 2010.
http://www.austrade.gov.au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia.pdf.aspx
32. Source: APRA website at http://www.apra.gov.au/ADI/ADIList.cfm
> 21
Commercial Lending
The level of total business loans outstanding from Australias financial institutions was in excess of A$620 billion as at October
2010.33 Commercial Lending credit to the non-financial sector grew at a CAGR of 11.1 per cent over the ten years to October
2010, with lending to the financial sector growing at 18.8 per cent CAGR over the same period. Lending grew more rapidly in
the early part of the decade and in 2007 and 2008 there was a market shift to intermediated lending as debt capital markets
became more difficult to access. Since 2008, commercial lending has been in decline, subtracting 6.6 per cent in 2009
and 2.4 per cent in 2010. Coinciding with this, equity capital markets saw a rise in secondary market issuance, with many
companies choosing to increase the proportion of their capital funded from equity (see Equity Capital markets section).
Australias Bank Commercial Lending Finance and Non-Finance
(Year End, A$ Billion, Excluding Securitisation)
800
Financial intermediaries (18.8%)
700
Non-financial sector (11.1%)
600
A$ Billion
500
400
300
200
100
0
Dec-2000
Dec-2001
Dec-2002
Dec-2003
Dec-2004
Dec-2005
Dec-2006
Dec-2007
Dec-2008
Dec-2009
Oct-2010
Year End
Note: The number in the brackets of the legends represents the compound annual growth rate since 2000.
Sources: Reserve Bank of Australia, Statistical Table D5 Lending and Credit Aggregates (Last updated 30 Nov 2010); Austrade
The major domestic banks provide the bulk of commercial intermediated lending in Australia, which includes loans to
large corporates, financial institutions, government organisations and SMEs. Regional banks, credit unions and building
societies provide some additional competition in the smaller enterprise sector and niche areas such as rural and agricultural
organisations. Similarly, leasing companies and other non-deposit taking finance companies provide specialised lending.
As at February 2011, the major domestic banks account for 72 per cent34 of bank loans to non-financial corporations, while the
other domestic banks account for 9 per cent and foreign banks 19 per cent. Suncorp-Metway and Bendigo Adelaide Bank are
the most significant competitors in the regional domestic banks, while the largest foreign bank competitors in non-financial
commercial lending are Rabobank, Bank of Tokyo-Mitsubishi, ING and BNP Paribas.35
33. Reserve Bank of Australia, Statistical Table D2, Lending and Credit Aggregates (last updated 30 November 2010).
34. Includes Bank of Western Australia, a wholly owned subsidiary of the Commonwealth Bank of Australia.
35. APRA, Monthly Banking Statistics, May 2010 (issued 30 June 2010).
Loans and Advances to Corporations on Australian Books of Individual Banks (A$ Million)
September 2010
Non-financial Corporations
92,370

Financial Corporations
Total
9,936
102,306
71,747
7,410
79,157
63,476
10,668
74,144
56,673
12,674
69,347
284,265
40,689
324,954
23,313
698 24,011
Suncorp-Metway Ltd
17,360
397
17,757
7,933
76
8,009
Macquarie Bank Ltd
4,147
1,253
5,400
5,297
5,297
Rural Bank Limited
3,572
3,572
AMP Bank Limited
583
587
51
19
70
62,256
2,448
64,703
11,001
11,001
3,287
3,287
3,097
99
3,197
2,357
2,357
842
842
526
63
589
405
405
31
131
162
21,547
293
21,840
6,728
347
7,075
BNP Paribas
5,921
200
6,121
4,214
981
5,195
4,661
398
5,059
Mizuho Corporate Bank, Ltd
3,856
687
4,543
Bank of China Limited
4,131
121
4,252
UBS AG
1,696
1,361
3,057
ING Bank N.V.
2,687
2,687
2,181
436
2,617
2,574
2,574
38,649
4,530
43,179
18,099
4,517
22,616
9,047
65,795
Citigroup Pty Ltd


Total
56,748
424,816
52,477 477,292
> 23
Over the past ten years, the fastest growing segment of commercial lending in Australia has been to larger corporations,
borrowing over A$2 million. Loans to SMEs have grown more gradually during this period.
Australias Bank Lending To Business Total Credit Outstanding by Size (A$ Billion)
Under
A$100,000
$100 000 to
< $500,000
$500 000 to
< $2 Million
$2 Million
and Over
Total
Jun-2000
22.6
44.1
39.0
151.2 256.9
Jun-2001
22.8
46.3
42.0
164.7 275.8
Jun-2002
23.7
50.9
45.2
164.6 284.4
Jun-2003
24.3
54.3
50.2
169.7 298.6
Jun-2004
24.8
60.2
57.8
196.1 338.9
Jun-2005
24.5
66.4
67.6
215.6 374.1
Jun-2006
24.1
70.1
76.5
268.7 439.5
Jun-2007
23.0
70.8
93.3
338.0 525.1
Jun-2008
23.7
75.0
101.1
449.7 649.6
Jun-2009
25.3
72.6
103.3
489.9 691.0
Jun-2010
26.0
67.3
101.4
464.1 658.8
Share %
4.0
10.2
15.4
70.4
100.0
CAGR %
1.4
4.3
10.0
11.9
9.9
Sources: Reserve Bank of Australia, Statistical Table D7 Bank Lending To Business (Last updated 16 Sep 2010); Austrade

Growth in lending by industry sector has varied considerably over the past 10 years. The fastest growing segments have been
finance and insurance, wholesale and retail trade, transport, storage, agriculture and fishing.
Australias Bank Lending To Business Total Credit Outstanding by Sector (A$ Billion)
Wholesale

Trade, Retail

Agriculture,
Trade & Transport Finance &

Fishing, etc
Mining
Manufacturing Construction & Storage
Insurance Other
Total
Jun-2000
23.2 7.5 30.0 13.1 34.3

39.5
109.4
256.9
Jun-2001
25.2 7.5 28.7 13.6 35.2

41.9
123.8
275.8
Jun-2002
26.8 7.5 28.9 12.8 40.7

43.4
124.2
284.4
Jun-2003
29.0 6.1 29.2 14.4 43.9

42.7
133.2
298.6
Jun-2004
34.1 5.2 31.8 17.7 49.3

47.4
153.5
338.9
Jun-2005
39.3 5.7 31.3 19.4 54.9

49.6
173.9
374.1
Jun-2006
43.5 6.8 37.1 21.3 64.2

62.5
204.1
439.5
Jun-2007
47.2 9.4 40.8 24.8 74.4

80.5
248.0
525.1
Jun-2008
53.7
11.7 44.6 30.5 87.2
123.7
298.2
649.6
Jun-2009
57.4
11.5 43.7 31.5 93.2
133.1
320.6
691.0
Jun-2010
59.3
15.1 39.7 28.3 92.9
126.1
297.4
658.8
Share %
9.0
2.3
6.0
4.3
14.1
19.1
45.1
100.0
CAGR %
9.8
7.3
2.8
8.0
10.5
12.3
10.5
9.9
Sources: Reserve Bank of Australia, Statistical Table D7 Bank Lending To Business (Last updated 16 Sep 2010); Austrade

Syndicated Debt
Global syndicated lending for the year to December 2010 totalled US$2.7 trillion, up 49 per cent from the previous year.
The energy and power sector was most active, with a market share of 21 per cent.
Australian mandated loans rose by 42 per cent for this same period, with total proceeds of US$66 billion. Australias total syndicated
loans represent around 2.1 per cent of the global market. Industrials, energy, power and financials were the most active, with
combined market share of 57 per cent of total syndicated loan proceeds (24 per cent, 17 per cent and 16 per cent respectively).
Other major sectors included materials (14 per cent), real estate (14 per cent) and telecommunications (9 per cent).36
The four major banks are prominent in this market, in terms of both arrangers and bookrunners.37 Significant foreign
competitors include RBS, Mitsubishi, Sumitomo Mitsui, JP Morgan, Credit Agricole and HSBC.
Australian Syndicated Loans Ranking
Mandated Arranger
2010 Rank
2009 Rank
ANZ Banking Group
Westpac Banking
RBS
5 7
Mitsubishi UFJ Financial Group
Sumitomo Mitsui Financial Group Inc
10
JP Morgan
18
Credit Agricole CIB

HSBC Holdings PLC
Bookrunner
10
12
2010 Rank
2009 Rank
ANZ Banking Group
Westpac Banking
RBS
5 6
JP Morgan
16
Bank of China Ltd
14
Mitsubishi UFJ Financial Group
Mizuho Financial Group
10
18
HSBC Holdings PLC
Sources: Thomson Reuters, Global Syndicated Loans Review, Full Year 2010; Austrade

On a five year total basis, Australian syndicated loan activity exceeded US$330 billion. Australian activity represents around
2.1 per cent of the world market and around 13 per cent of the Asia-Pacific region.
36. Thomson Reuters, Global Syndicated Loans Review, Full Year 2010.
37. Bookrunner is the main underwriter to the issue.
> 25
Worldwide Syndicated Loans
2010
2009
2008
2007
2006
2006-2010
Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market
(US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share %
Global
2,718.7 100.0 1,829.9 100.0 2,624.0 100.0 4,617.9 100.0 3,981.7 100.0 15,772.2 100.0
By country
USA
1,089.0 40.1 579.2 31.7 1,036.2 39.5 2,136.2 46.3 1,735.4 43.6 6,576.1 41.7
Japan
252.1 9.3 249.2 13.6 289.7 11.0 208.4 4.5 216.3 5.4 1,215.6 7.7
UK
190.9 7.0 82.8 4.5 196.7 7.5 389.8 8.4 314.1 7.9 1,174.3 7.4
Germany
96.3 3.5 104.2 5.7 84.7 3.2 231.9 5.0 303.1 7.6 820.1 5.2
France
129.2 4.8 89.7 4.9 119.1 4.5 255.0 5.5 226.5 5.7 819.5 5.2
Canada
110.1 4.0 71.3 3.9 123.1 4.7 137.3 3.0 118.5 3.0 560.4 3.6
Australia
66.0 2.4 46.4 2.5 52.7 2.0 100.3 2.2 70.9 1.8 336.3 2.1
Taiwan
55.6 2.0 22.1 1.2 31.1 1.2 29.1 0.6 29.1 0.7 166.9 1.1
UAE
16.4 0.6 22.1 1.2 45.7 1.7 45.0 1.0 33.8 0.8 163.0 1.0
Hong Kong
41.1 1.5 18.4 1.0 10.8 0.4 20.7 0.4 31.7 0.8 122.7 0.8
Singapore
22.8 0.8 16.5 0.9 35.2 1.3 14.1 0.3 19.7 0.5 108.2 0.7
Brazil
7.8 0.3 15.0 0.8 13.9 0.5 25.3 0.5 33.6 0.8 95.6 0.6
Mexico
9.9 0.4 24.8 1.4
6.3 0.2 20.1 0.4 19.4 0.5 80.5 0.5
New Zealand
8.6 0.3 5.9 0.3
7.0 0.3 6.5 0.1 11.4 0.3 39.4 0.2
Malaysia
11.1 0.4 3.8 0.2
5.4 0.2 10.8 0.2
7.2 0.2 38.3 0.2
By Region
Americas
1,222.3 45.0 694.4 37.9 1,205.4 45.9 2,339.0 50.6 1,925.9 48.4 7,386.9 46.8
Europe
818.3 30.1 608.5 33.3 784.7 29.9 1,633.6 35.4 1,481.2 37.2 5,326.4 33.8
Asia-Pacific/Central Asia
610.5
22.5 470.9 25.7 533.6 20.3 505.5 10.9 470.0 11.8 2,590.4 16.4
Africa/Middle East
67.6 2.5 56.1 3.1 100.3 3.8 139.9 3.0 104.6 2.6 468.5 3.0
Sources: Thomson Reuters Global Syndicated Loans Review, Full Year 2010, Syndicated Loans Review, Fourth Quarters of 2009, 2008 and 2007; Austrade

Project and Infrastructure Finance

The global project finance market showed a significant rebound in 2010, with 587 deals valued at US$206.6 billion. This
represented an expansion in total loans of 44.4 per cent compared to the previous year. According to the latest survey of
Reuters Thomson, each region saw an increase in deal activity: Americas increased 24.6 per cent, Europe/Middle East/Africa
(EMEA) increased 28.3 per cent and Asia Pacific, with the largest rise, increased 69.8 per cent.
The Asia Pacific (including Japan) accounted for 47.2 per cent of global activity (US$97.5 billion). This increased from a global
share of 40.2 per cent in 2009 (US$57.4 billion). Australia has remained the second most active market in the region, behind
India, with 32 deals valued at US$14.6 billion38, which accounted for 15 per cent of the regions total. Australias four major
banks all ranked within the top 20 mandated arrangers for the Asia Pacific in 2010.39
Infrastructure is one of the most significant areas for project financing and Australia is widely recognised as a global leader and
innovator in infrastructure financing. The nation has a long history of engagement in the infrastructure sector, beginning with
the privatisations of the late 1980s and 1990s that has resulted in extensive experience with private infrastructure financing
and public-private partnerships (PPPs).
38. Thomson Reuters, Project Finance Review, Full Year 2010.

39. Ibid.
Australian expertise extends across the full spectrum of economic and social infrastructure including toll roads, airports, railway
rolling stock and terminals, broadcast communications, power generators, gas and electricity transmission and distribution,
shipping ports, water utilities, schools, hospitals, aged care facilities and public housing.
The Australian infrastructure market is among the most sophisticated markets in the world with estimated A$9 billion in
infrastructure construction projects work contracted annually. In the 2009-10 Budget, the Australian Government committed
A$22 billion to improve the nations infrastructure in transport, communications, energy, education and health sectors as part
of the Building Australia Fund. In addition, State Governments have committed an estimated A$2.5 billion to infrastructure
projects.40
Infrastructure needs and priorities for Australia are laid out by Infrastructure Australia. Appendix F provides an overview of
priority projects as at June 2010. The value of these projects totals almost A$83 billion.41
Infrastructure Australias Investment Priorities
Stage
Definition

Total Cost Estimates

(A$ Million)
Early Stage Initiatives address a nationally significant issue or problem,

but the identification or development of the right solution is
at an early stage.
19,634
Real Potential Initiatives clearly address a nationally significant issue or problem

and, there has been a considerable amount of analysis of potential solutions.
41,522
Threshold Initiatives have strong strategic and economic merit, and are only not
ready to proceed due to a small number of outstanding issues.
10,123
Ready to proceed
11,566
Initiatives meet all of Infrastructure Australias criteria.
Source: Infrastructure Australia, Getting the fundamentals right for Australias infrastructure priorities, June 2010
http://www.infrastructureaustralia.gov.au/publications/files/Report_to_COAG_ 2010.pdf
Infrastructure Australia
Infrastructure Australia (IA) was established in 2008 to coordinate a national approach to Australias future infrastructure
needs. The agency plays an advisory role to governments, investors and owners of infrastructure concerning:
Significant national infrastructure priorities and initiatives;
Options to address hindrances to the development and provision of efficient national infrastructure;
ecommendations for policy and regulatory reforms to drive better efficiencies in the utilisation of national
R
infrastructure networks;
Infrastructure needs of the Australian public; and
Possible financing mechanisms.
More information on Infrastructure Australia and its policies and guidelines is available at: www.infrastructureaustralia.gov.au
In addition to public sector infrastructure projects, Australia is currently undergoing significant investment in private sector
projects that will increase the output of Australias mineral and energy sectors.
Infrastructure projects directly associated with the minerals and energy sector currently stand at 15, with an estimated cost
of A$11.0 billion in committed projects, and a further 31 valued at A$27.8 billion in less advanced projects.42 Committed
infrastructure projects include iron ore and coal ports, rail projects and gas pipelines. Appendix G outlines the future capital
expenditure commitments within Australias minerals and energy sectors.
40. KPMG, Federal Budget 2009-10 national infrastructure spending priorities June 2009.
41. Infrastructure Australia, Getting the Fundamentals Right for Australias Infrastructure Priorities, June 2010.
42. ABARE-BRS, Minerals and energy Major development projects report, October 2010.
> 27
Trade Finance
Australia has an open, diversified economy that is actively engaged in international trade and has increasingly exported goods
and services to the fast growing Asian region.
In 2010, Australia exported A$231 billion in merchandise trade, having grown at 7.7 per cent CAGR since the year 2000.
The majority of Australias exports are natural resources and primary products and account for around 70 per cent of Australias
total merchandise exports.
Australias Merchandise Exports, FOB Value (A$ Billion)

2000 2002 2004 2006 2008 2010 2010 CAGR %

% Share
2000/2010
Crude Materials, Inedible, except Fuels
Metalliferous Ores & Metal Scrap
Mineral Fuels & Related Materials
Coal, Coke & Briquettes
21.2
22.0
23.1
39.2
56.3
75.6
32.8
13.5
13.4
13.9
16.3
32.7
50.0
68.9
29.9
17.8
23.0
24.7
23.8
39.3
71.1
66.6
28.8
11.2
9.3
12.9
13.5
23.4
46.9
43.1
18.7
16.5
Petroleum & Related Materials
10.5
8.6
7.1
9.8
13.8
12.9
5.6
2.1
Gas, Natural & Manufactured
3.2
3.2
3.3
6.2
10.4
10.5
4.6
12.6
Manufactures
34.9 37.2 33.9 42.0 47.1 40.4
17.5 1.5
Food & Beverage & Tobacco & Live Animals
21.0
10.3
Other
10.1 11.5 13.2 19.9 22.7 24.5
10.6 9.3
TOTAL
110 119 118 164 222 231
100 7.7
24.1
23.7
23.4
25.2
23.7
1.2
1. Commodities not classified elsewhere in the Standard International Trade Classification. CAGR = Compound Annual Growth Rate.
Sources: Australian Bureau of Statistics Cat No. 5368.0 International Trade in Goods and Services, Australia, Table 12a. Merchandise Exports; Austrade

Over the past ten years, Australian exports to Asia have grown more rapidly than other regions. Four of Australias top five
country export destinations are now based in Asia.
Exports 2010 (% Share)
Imports 2010 (% Share)
Middle East 2.9%

Oceania 4.9%
Middle East 2.2%

Africa 1.6%
Africa 1.6%
Oceania 5.3%
Americas 6.1%
Americas 14.3%
South Asia 7.8%
South Asia 1.2%
Europe 9.1%
East Asia 67.9%
East Asia 54.6%

Europe 20.9%
Sources: Department of Foreign Affairs and Trade, Monthly Trade

Data Dec 2010, Table 3; Austrade
Sources: Department of Foreign Affairs and Trade, Monthly Trade

Data Dec 2010, Table 4; Austrade
Australias Merchandise Exports by Country, FOB Value (A$ Billion)

2000 2002 2004 2006 2008 2010 2010 CAGR %

% Share
2000/2010
1 China
2
Japan
3
South Korea
4
India
5 USA
6.0
8.4
11.0
20.4 32.3
58.3
21.8 22.2 22.2 32.4 50.8 43.6

9.0
10.0
9.2
12.4
18.4
20.4
1.8 2.5 5.4 8.8

13.5
16.4
11.0
11.5
9.5
10.1 12.1
9.3
25.3
25.5
18.9 7.2
8.8
8.5
7.1 24.5
4.0
-1.7
6
Taiwan
5.6 4.7 4.1 6.3 8.3 8.4
3.6 4.2
7
UK
3.8 5.6 5.1 8.1 9.3 8.3
3.6 8.3
8
New Zealand
6.6 7.9 8.8 8.9 9.3 8.0
3.5 2.0
9
Thailand
2.0 2.5 3.1 4.3 5.3 5.8
2.5 11.6
10
Singapore
5.9 5.0 3.3 4.6 6.1 4.8
2.1 -1.9
11
Indonesia
2.9 3.1 3.2 4.4 4.3 4.5
1.9 4.5
12
Malaysia
2.4 2.3 2.4 2.8 4.0 3.6
1.6 4.4
13
Hong Kong
3.6 3.5 2.7 3.2 3.0 3.2
1.4 -1.2
14
Netherland
1.8 1.4 1.5 2.8 3.6 2.6
1.1 3.9
15
UAE
1.0 1.3 1.3 2.0 3.9 2.1
0.9 7.8
16
1.0
0.9
Papua New Guinea
1.0
0.9
1.5
1.6
2.0
7.5
17
Germany
1.3 1.6 1.3 1.4 2.1 1.8
0.8 3.4
18
South Africa
1.3 1.3 1.6 2.3 2.5 1.8
0.8 3.6
19
Saudi Arabia
1.6 2.4 2.0 2.2 2.5 1.6
0.7 -0.1
0.6 0.4 0.6 0.9 1.6 1.6
0.7 10.6
20
Brazil

Other Markets
19.5 20.8 18.4 24.0 27.7 22.6
9.8 1.5
TOTAL
110 119 118 164 222 231
100 7.7
CAGR = Compound Annual Growth Rate.

Sources: Australian Bureau of Statistics Cat No. 5368.0 International Trade in Goods and Services, Australia, Table 14a; Austrade

In addition to merchandise trade, Australia exported A$53 billion worth of services in the fiscal year 2009-10, with travel
(including business and personal education-related services) contributing A$33.4 billion, or over 60 per cent of Australias
services exports.
The Australian Government also assists Australian businesses with trade finance solutions through the Export Finance &
Insurance Corporation (EFIC). In fiscal year 2010, EFIC provided financing facilities totalling A$971.3 million that supported
export contracts and overseas investments of over A$5.9 billion.43
Export Finance Navigator for SMEs lists the following banks with specialist trade finance teams44 in Australia:
Australia and New Zealand Bank

Bank of Queensland
Bendigo Bank
HSBC
Westpac
43. Export Finance & Insurance Corporation (EFIC) http://www.efic.gov.au/Pages/homepage.aspx

44. Export Finance Navigator http://www.exportfinance.gov.au/Pages/Preparingforexport.aspx
> 29
Corporate Finance and Advisory

Mergers and Acquisitions
Mergers and Acquisitions (M&A) activity improved in 2010 as the world economy recovered from the global financial crisis,
according to the Thomson Reuters Full Year 2010 M&A Financial Advisory Review. The value of global-announced M&A
totalled US$2.4 trillion in 2010, up 22.9 per cent from 2009. Australias M&A announced value reached US$132 billion in 2010,
a 140 per cent increase from 2009. The rebound in Australias M&A activity last year was largely driven by the mining, financial,
energy and telecommunications sectors.
In the Asia-Pacific region M&A activity is heavily concentrated in the top three economies (Australia, China and Japan).
Together, their announced deals were worth around US$347 billionaccounting for more than 60 per cent of the regions total.
Of the top ten financial advisors in Australia, based on completed M&A by imputed fees, nine are foreign-based global
investment houses and one is the Australia-based Macquarie Group. They together generated US$648 million in imputed fees
in 2010, accounting for 43 per cent of Australias M&A advisory fees.
On a five-year total basis, Australian M&A activity has been significant with announced deals totalling US$528 billion. The total
value of the Australian deals was the largest in the Asia-Pacific region. Australian activity represents around 3.5 per cent of
global deal flow and more than one-fifth of that of the Asia-Pacific region.
Australia has a vibrant Private Equity (PE) market, raising A$17 billion over the five years to June 2010. International and
domestic PE leveraged buyouts continue to contribute significantly to M&A activities. The largest PE deal for 2010 was the
A$2.7 billion45 buyout of Australias second largest private hospital owner and pathology provider, Healthscope.
Worldwide Announced Mergers & Acquisitions Financial Advisors
2010
2009 2008 2007
2006
2006-2010
Rank Market Rank Market Rank Market Rank Market Rank Market Rank Market
Value Share Value Share Value Share Value Share Value Share Value Share
US$Bn
%
US$Bn
%
US$Bn
%
US$Bn
%
US$Bn
%
US$Bn
%
Worldwide
2,434.2 100.0 1,980.3 100.0 2,887.0 100.0 4,169.1 100.0 3,609.9 100.0 15,080.6 100.0
Americas
1,136.3 46.7 921.7 46.5 1,156.4 40.1 1,890.4 45.3 1,762.9 48.8 6,867.7 45.5
USA
821.6
33.8
719.4
36.3
923.8
32.0
1,570.8
37.7
1,475.2
40.9
5,510.8
36.5
Brazil
104.2
4.3
65.4
3.3
93.1
3.2
46.0
1.1
33.6
0.9
342.2
2.3
99.6
4.1
95.9
4.8
85.5
3.0
197.6
4.7
162.1
4.5
640.8
4.2
Canada
Europe
UK
Asia-Pacific
Australia
641.0 26.3 581.0 29.3 1,168.7 40.5 1,592.6 38.2 1,325.2 36.7 5,308.4 35.2
162.9
6.7
160.0
8.1
269.0
9.3
387.1
9.3
333.8
9.2
1,312.8
8.7
565.9 23.2 428.4 21.6 512.2 17.7 596.6 14.3 458.5 12.7 2,561.5 17.0
131.7
5.4
54.8
2.8
90.2
3.1
136.5
3.3
114.5
3.2
527.7
3.5
Japan
83.9
3.4
104.9
5.3
77.0
2.7
136.4
3.3
101.3
2.8
503.4
3.3
China
131.1
5.4
108.7
5.5
113.6
3.9
75.4
1.8
46.7
1.3
475.6
3.2
Africa/Middle East
91.0 3.7 49.3 2.5 49.7 1.7 89.5 2.1 63.4 1.8 342.9 2.3
Sources: Thomson Reuters Mergers & Acquisitions Financial Advisors, Full Year 2010, Fourth Quarter 2009, Fourth Quarter 2008 and Fourth Quarter 2007; Austrade

Equity Capital Markets

Australia has a large and liquid equities market. During the financial crisis in 2008-09, Australias equity capital market
provided support for corporations seeking capital off-setting, in part, the disruption experienced in international debt markets.
Total equity market raisings46 increased by 7.5 per cent during this period with secondary market raisings rising 74 per cent
from A$50.6 billion to A$88.1 billion. Many companies raised equity through rights issues and placements to strengthen their
balance sheets and meet the short fall from debt markets at this time.
45. Enterprise Value at time of announced deal, 19th July 2010.

46. Includes Rights Issues, placements, calls on contributing shares, exercise of options, employee share schemes, DRPs, SPPs.
New Capital Raisings for Cash in Australia (A$ Million)

% of Average
Primary Raisings
Secondary Raisings

Market
Survey Year
IPOs
Privatisations
Rights Issues
Placements
Other1
Total Capitalisation
1999-00
6,939
9,706
4,587
9,024
6,613
36,869
5.9
2000-01
8,519
6,400
549
4,293
5,748
25,509
3.7
2001-02
2,857
200
992
5,310
6,758
16,117
2.2
2002-03
5,961
2,446
7,032
7,608
23,047
3.4
2003-04
12,753
8,753
7,640
9,487
38,633
5.0
2004-05
14,883
3,242
7,896
11,125
37,146
4.1
2005-06
23,108
2,468
12,817
13,041
51,434
4.7
2006-07
19,694
8,679
13,001
19,789
16,742
77,905
5.6
2007-08
11,003
12,449
20,920
17,271
61,643
4.3
2008-09
1,885
28,506
38,235
21,338
89,964
7.5
2009-10
11,459
23,182
23,118
18,785
76,544
5.6
CAGR %
5.1
17.6
9.9
11.0
7.6
1. Other includes Calls on Contributing Shares, Exercise of Options, Employee Share Schemes, Dividend Reinvestment, Prospectus, SPP.
Sources: AFMA Australian Financial Markets Report; Austrade

With 2,072 listed companies, the Australian stock market is the second largest free-floating stock market in Asia-Pacific after
Japan at US$1,148 billion.
Size of Key Stock Markets in the Asia-Pacific Region

Market Capitalisation of Floating Captals (US$ Billion, 31 Dec 2010)
1,400
1,200
1,148
USA
Japan
UK
Canada
France
Germany
US$ Billion
1,000
806
800
14,187
2,856
2,675
1,578
1,160
999
718
638
600
472
446
400
245
200
125
Australia
China
South
Korea
Taiwan
Hong
Kong
India
Singapore
110
84
38
Malaysia Indonesia Thailand Philippines
20
New
Zealand
Sources: Standard & Poors, Global Broad Market Index, Dec 2010; Austrade

> 31
Corporate advisory services are provided by way of arranging and underwriting new equity securities for domestically
domiciled corporations from the private and public sectors. A large portion of equity is raised in the secondary market through
rights issues (or entitlement offers) and institutional placements. Over the past three years, secondary market issuance far
exceeded primary market issuance as listed companies recapitalised and paid down debt. Commentators expect primary
issuance to increase as the market outlook improves.
Over the five years, Australias equity capital market raised almost US$200 billion, representing 5.1 per cent of the global equity
raisings of US$3.9 trillion.
Global Equity Capital Markets Equity and Equity-Related1
2010
2009
2008
2007
2006
2006-2010
Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market
(US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share %
USA
200.9 23.5 249.1 28.5 238.2 37.7 227.1 27.8 208.1 28.9 1,123.4 28.9
Europe, Middle
East & Africa2
179.6
21.0
268.7
30.8
214.8
Asia Pacific
306.6 35.9 165.7 19.0
(ex Japan & Australia)
34.0
345.2
42.3
228.9
31.8
1,237.2
31.8
79.0 12.5 159.5 19.6 141.9 19.7 852.7 21.9
Japan
58.3 6.8 64.3 7.4 15.1 2.4 25.4 3.1 68.0 9.5 231.1 5.9
Australia
29.1 3.4 58.9 6.8 40.1 6.4 36.7 4.5 34.5 4.8 199.4 5.1
Latin America 51.6 6.0 30.5 3.5 24.2 3.8 49.4 6.1 17.8 2.5 173.5 4.5
854.2
872.7
631.3
815.5
719.5
3,893.1
Global Total2
1. Including Intial Public Offerings, Secondary Offerings and Convertible Offerings.
2. The regional total for Europe, Middle East & Africa in 2007 include Rights Offers that are not included in other regional sub-totals or the Global total.
Sources: Thomson Reuters Global Equity Capital Markets, Full Year 2010, Fourth Quarter 2009, Fourth Quarter 2008 and Fourth Quarter 2007; Austrade

All ten of the worlds largest arrangers operates in the Australian equity capital markets. In 2010, A$29.1 billion equity was
raised with estimated imputed fees of A$756 million.47
Australian Equity Capital Markets

Jan 1 2010 Dec 31 2010
Bookrunner
Proceeds per Bookrunner (A$Mn)

2010
Market
Rank
Proceeds
Share (%)
Imputed Fees (A$Mn)

Manager
Market
Fees
Share (%)
UBS
8,366 26.1
Bank of America Merrill Lynch
3,088
9.6
46.8
6.2
Credit Suisse
2,393
7.5
37.6
5.0
RBS
4 2,179 6.8
56.1 7.4
JP Morgan
2,154
6.7
42.0
5.6
Goldman Sachs & Co
2,144
6.7
37.2
4.9
Macquarie Group
1,694
5.3
49.1
6.5
Morgan Stanley
1,455
4.5
27.2
3.6
Citi
Deutsche Bank AG
9 1,094 3.4
144.8 19.2
19.1 2.5
10
1,077
3.4
22.5
3.0
Top Ten Total
25,643
80.0
482.4
63.8
Industry Total
32,056
100.0
755.7
100.0
Sources: Thomson Reuters, Equity Capital Markets Review, Full Year 2010, Australian Equity Capital Markets; Austrade

47. Thomson Reuters, Equity Capital Markets Review, Full Year 2010.
The Government is progressing towards the introduction of competition to exchange markets in Australia. On 1 August 2010,
market supervision for local exchanges transferred to the Australian Securities and Investment Commission (ASIC) and in April
2011, ASIC published new market integrity rules to provide the framework for the introduction of competition in equity exchange
markets. These rules are expected to begin on 31 October 2011.48 On 4 May 2011, the Government granted a licence to Chi-X
Australia Pty Ltd as an alternative securities exchange. In a joint media release, the Treasurer and Assistant Treasurer said
Competition in Australias financial markets is critical to promoting exchange innovation, lowering transaction costs for market
participants, leveraging our pool of national superannuation savings, and improving liquidity and access to capital for companies.49
Debt Capital Markets

Debt capital markets include the issuance of bonds by Australian governments and non-government institutions, asset-backed
securities and Kangaroo bonds (bonds issued in Australian dollars by non-residents).
Australia has US$1.4 trillion debt securities outstanding the regions third largest amount after Japan and China. Australian
governments and business issue in both domestic and international markets. Domestic debt market issuance totalled
A$116.6 billion50 in 2010 with A$70.3 billion51 issued through offshore markets namely the US, Europe and Japan.
International and Domestic Debt Securities Amount Outstanding
Residence of Issuer (US$ Billion, June 2010)
3,500
3,000
Domestic Securities
24
International Securities
2843
US$ Billion
2,500
2,000
USA
Japan
UK
France
Germany
Italy
Canada
1,500
531
126
1,000
6,177
168
3,500
1,694
1,901
1,001
592
1049
845
30
655
500
25,081
12,457
1,550
2,850
2,411
3,192
1,336
China
Australia
South
Korea
India
26
205
225
8
201
Malaysia
Taiwan
Thailand
50
51
23
117
115
106
Hong
Kong
37
58
Singapore Indonesia Philippines
9
32
New
Zealand
Sources: Bank for International Settlements, Quarterly Review, Dec 2010, Tables 11 and 16A; Austrade
Over the decade to June 2010, non-government debt outstanding more than tripled from around A$400 billion to A$1.3 trillion.
Non-government debt securities were more than four times the government debt securities outstanding with the local financial
institutions being the largest issuers in these markets.
48. A
ustralian Securities and Investment Commission 10-151MR ASIC ready for market supervision http://www.asic.gov.au/asic/asic.nsf/byheadline/10-151MR+ASIC+rea
dy+for+market+supervision?openDocument. ASIC 11-87MR ASIC publishes final competition market integrity rules 29 April 2011 http://144.140.79.138/asic/asic.nsf/
byheadline/11-87MR+ASIC+publishes+final+competition+market+integrity+rules?openDocument
49. Australian Government Treasury Government approves new financial markets competitor 4 May 2011 http://ministers.treasury.gov.au/DisplayDocs.
aspx?doc=pressreleases/2011/067.htm&pageID=003&min=brs&Year=&DocType
50. Includes public domestic non-government bonds (including Kangaroo bonds), semi-government bonds and asset backed securities. Does not include The
Commonwealth Government of Australias bonds that had gross bond issuance of A$58.4 billion in the year to June 2010. See the AOFM Annual Report http://www.aofm.
gov.au/content/publications/reports/AnnualReports/2009-2010/download/AOFM_Annual_Report_2009-10.pdf
51. Australian and New Zealand entities. Source, INSTO League Tables as at 10 January 2011.
> 33
Australias Debt Securities Outstanding (Fiscal year ending June, A$ Billion)

1,800
1,600
Non-Government Short Term

Non-Government Long Term
1,400
Non-Government Overseas
Government
A$ Billion
1,200
1,000
800
600
400
200
0
1993 1994 1995 1996
1997
1998 1999 2000 2001
2002 2003 2004 2005 2006 2007 2008 2009 2010
Sources: Reserve Bank of Australia, Statistical Table D4 (data downloaded 30 Sep 2010); Austrade
In 2010, public domestic bond issuances (including self-led deals) in Australia totalled 194 deals valued at A$116.6 billion. By
far the majority of these issues were in public domestic non-government bonds, the bulk of which were issued by financial
institutions (106 deals valued at A$69.6 billion). This figure also includes 76 Kangaroo bond issues (foreign entity bonds issued
through the domestic market in Australian dollars) valued at A$36.1 billion.
Public Domestic Bond Issuances
including self-led deals 01/01/2010 31/12/2010
Bookrunner
Public Domestic non-government
A$m Deals
81,665
149
Semi-government bonds
13,100
10
Public Domestic ABS
21,785
35
116,550
194
TOTAL
1. Includes A$36.1 billion Kangaroo bonds.
Source: INSTO League Tables as at 10 January 2011

Bonds issued onshore totalled A$417 billion at June 2010, of which A$294 billion was issued by locally domiciled entities and
A$124 billion issued by non-resident issuers (Kangaroo bonds). Australias financial institutions are the largest issuers of bonds
in the local market.
Australias Corporate Bonds Outstanding Issued Onshore1

A$ Billion
Banks and Other

Financial Corporations
Non-financial
corporations
Asset-
backed
Non-Residents
(Kangaroo Bonds)
Total
Jun-2000
19
17 24
70
Jun-2001
24
23 30 18
95
Jun-2002
27
28 42 21 117
Jun-2003
28
32 52 20 132
Jun-2004
35
33 64 34 166
Jun-2005
48
39 79 48 214
Jun-2006
64
42 99 81 286
Jun-2007
78
48 122 103
352
Jun-2008
99
45 112 110
366
Jun-2009
135
41 99 103 378
Jun-2010
172
41 81 124 417
Share %
41.1
9.7
19.5
29.7
100.0
CAGR % since 2000
24.3
8.9
12.8
30.1
19.5
1. Long-term non-government securities issued in Australia.

Sources: Reserve Bank of Australia, Statistical Table D4 Debt Securities Outstanding; Austrade
Australias major banks were the largest arrangers in 2010 with many foreign banks providing competition in the market.
Public Domestic Non-Government Bonds1 including self-led deals 01/01/2010 31/12/2010
Rank
Bookrunner
A$m
Deals2
ANZ
14,871
53
10,663
21
Westpac Institutional Bank
10,106
36
9,669
35
UBS
7,896
34
RBC Capital Markets
7,488
40
TD Securities
5,963
34
JPMorgan
2,971
10
HSBC
2,933
10
Royal Bank of Scotland
2,546
12
11
Deutsche Bank
2,392
13
12
Credit Suisse
1,058
13
BNP Paribas
1,017
14
Macquarie Group
629
15
BMO Capital Markets
350
16
Merrill Lynch
300
17
Barclays
300
18
Nomura
238
19
Nikko SSB
225
20
RaboBank
50
Total
81,665
149
1. A$50 million minimum, 1 year minimum. Pricing must be disclosed. All increases eligible. Excludes ASX listed corporate bonds.
2. Bookrunners given equal allocation.
Source: INSTO Leagues Table, as at 10 January 2011
> 35
A recent Government review, Australia as a Financial Centre (November 2009),52 found that if Australia is to develop as a
leading financial centre that provides liquid and efficient financial services across a broad range of products and asset classes,
then a more diversified and liquid bond market should be part of that vision.
In May 2010, the Government announced that the Australian Securities and Investment Commission (ASIC) would introduce
a class order relief permitting listed entities, within certain parameters, to issue bonds to retail investors using a simplified
process.53
The initiatives simplify the disclosure requirements for certain offers of listed vanilla bonds by allowing such offers to be made
with reduced disclosure under a short-form prospectus. The measures also allow vanilla bonds to be offered under a two-part
prospectus, comprising a base prospectus (which may be used for a number of different offers) and a second part prospectus
(which will relate to a particular offer).
In December 2010, the Government announced further reforms, including reducing red tape associated with issuing corporate
bonds to retail investors, streamlining disclosure requirements and prospectus liability regulations. It will also facilitate the
trading of Commonwealth Government Securities on a securities exchange in Australia, as part of its broader agenda to foster
a deep and liquid corporate bond market.54
Asset-backed Securities
Australias asset-backed securities market has operated for over twenty years and has provided funding for Australian commercial
and residential mortgages, credit cards, auto and equipment leases, and other asset-backed securities (ABS). The largest
component of this market has been residential mortgage backed securities (RMBS) which represents around 77 per cent of
Australian ABS on issue. Worldwide, this market was dramatically affected by the credit crisis. Recent RMBS issuance in Australia
has increased from a low of A$9.9 billion in 2008 to A$14.1 billion and A$19.5 billion in 2009 and 2010 respectively.
Australian RMBS Issuance $A Equivalent, Annual
60
Onshore
50
Offshore
Purchases by the AOFM
A$ Billion
40
30
20
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Year
Sources: The Reserve Bank of Australia, The State of Play in the Securitisation Market, 30 November 2010; Austrade
Commercial banks (both domestic and foreign) are the main arrangers in the local market.
52. Australia as a Financial Centre Report http://www.austrade.gov.au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia.pdf.aspx

53. Australian Securities and Investment Commission MR10-98 Prospectus relief to help corporate bond market http://www.asic.gov.au/asic/asic.nsf/byheadline/MR10-98+Pr
ospectus+relief+to+help+corporate+bond+market?openDocument
54. See Australian Government Competitive and Sustainable Banking System report http://www.treasury.gov.au/banking/content/_downloads/competitive_and_sustainable_
banking.pdf
Public Domestic Asset-Backed Securities including self-led deals 01/01/2010 31/12/2010
Rank
Bookrunner
A$m
Deals
Westpac
4,788
15
Deutsche Bank
3,553
12
Macquarie
3,368
3,231
13
ANZ
1,855
1,421
1,181
JPMorgan
662
Credit Suisse
636
10
Suncorp Metway
533
11
Barclays
217
12
Bank of Scotland
204
13
Lloyds TSB
136
Source: INSTO Australian League Tables, as at 13 January 2011
Securitisation remains an important funding source for non-bank lenders, regional banks, building societies and credit unions.
The Australian Government continues to offer support to this market through the Australian Office of Financial Managements
(AOFMs) active buying program of high quality AAA-rated RMBS. In December 2010, the Federal Treasurer announced an
additional A$4 billion commitment to the AOFMs purchasing program, taking the total AOFM program to A$20 billion. Since
2008 the AOFM has purchased 74 tranches in 46 RMBS deals totalling A$12.8 billion.
As part of the Federal Governments Banking Reforms announced in December 2010, the Treasury will accelerate work on
designing structures for the issuance of bullet RMBS. In late 2010, two Australian issuers BankWest and Bendigo Adelaide
Bank issued tranches with bullet features. More recently, the Commonwealth Bank of Australia issued a A$3 billion RMBS
deal with a soft bullet tranch worth A$525 million. Bullet structures may increase the investor universe to include those who
require non-amortising principal repayments. Bullet RMBS could be eligible for inclusion in certain bond market indices
opening the market to institutional investors restricted to the securities listed in these indices.
Further details on Australias Residential Mortgage Backed Securities Market can be found at Austrades January 2011
publication Securitisation. Australian Residential Mortgage Backed Securities available at http://www.austrade.gov.au/
ArticleDocuments/2792/Data-Alert-110124-RMBS.pdf.aspx
Kangaroo bonds
Kangaroo bonds are corporate, semi-government or supranational bonds issued by non-resident entities through A$ markets.
The Kangaroo bond market is the fastest growing sector of Australias domestic bond market, having increased considerably
since the late 1990s with many non-resident corporations issuing bonds into the market during the decade commencing
2000. Over the ten years to October 2010, Kangaroo bonds outstanding have increased from A$9 billion to almost A$130
billion, a CAGR of 27.7 per cent.
> 37
Kangaroo Bonds1
140
Bonds Outstanding A$ Million
120
100
80
60
40
2010
2009
2008
2009
2007
2008
2006
2007
2005
2006
2004
2005
2003
2004
2002
2003
2001
2002
2001
2000
1999
2000
1998
1999
1997
1998
1996
1997
1995
1996
1994
1995
1993
1994
1992
1993
20
1. Long-Term Non-Government Securities Issued in Australia Non-Residents.

Sources: Reserve Bank of Australia, Statistical Table D4 Debt Securities Outstanding
The attractiveness of the market is intrinsically tied to the development of Australias foreign currency swap market. The
development of Australias swap market provides competitive pricing for foreign firms to swap currency exposures back into
their local currencies. In 2010, a total of A$36.1 billion was issued across 76 transactions. Arrangers included the Australian
operations of foreign banks and Australias major banks.
Public Domestic Kangaroo Bonds1 including self-led deals 01/01/2010 31/12/2010

Rank
Bookrunner
A$m
Deals2
RBC Capital Markets
6,572
37
TD Securities
5,963
34
UBS
4,558
24
4,083
21
3,196
16
HSBC
2,433
4
11
Westpac Institutional Bank
2,317
JPMorgan
2,117
Deutsch Bank
1,942
11
10
775
11
567
12
BMO Capital Markets
350
13
Credit Suisse
325
14
Merrill Lynch
300
15
Nomura
238
16
Nikko SSB
225
17
BNP Paribas
100
18
RaboBank
50
Total
36,110
76
1. A$50 million minimum, 1 year minimum. Pricing must be disclosed. All increases eligible.
2. Bookrunners given equal allocation.
Source: INSTO Australian Financial Markets League Tables
Many Kangaroo bonds have high credit ratings and, as they can be eligible collateral for use by ADIs in repurchase
agreements with the RBA, provide extra liquidity to holders of these bonds. The local investors for these bonds include
domestic and foreign banks and local fixed-interest fund managers. Non-resident issuers benefit from an alternative funding
source in a developed market with strong common law, a developed derivatives market and a fast growing pension funds
industry.
Austrades publication Investment Management Industry in Australia highlighted that Australias asset allocation to fixed
income investments has been maintained at 12-15 per cent over recent years. With superannuation funds projected to
continue to grow strongly over the coming decades, the appetite for quality bond issuance in the Australian market place is
expected to continue.
Over-the-counter and exchange-traded markets

The 2010 Australian Financial Markets Report, released by the Australian Financial Markets Association (AFMA), shows that
Australias annual turnover of over-the-counter and exchanged-traded markets have exceeded A$100 trillion. Aggregate
Australian financial markets (over-the-counter (OTC) and exchange-traded) turnover rose 5.4 per cent to almost A$102 trillion
in 2009-10, reversing the global financial crisis induced decline (16.3 per cent) of the previous year. The total market turnover
in 2009-10 was more than two and half times that of ten years ago, reinforcing the growth in depth and sophistication of
Australias financial markets.
Australia Financial Markets Annual Turnover
Financial Year Ending June

OTC Markets
CAGR %
(A$ Trillion)
since
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2000
27.4 30.3 37.9 42.5 53.3 51.7 60.5 70.9 73.0 69.9 66.7 9.3
Foreign Exchange
15.9 18.2 21.8 26.4 34.1 33.6 41.6 46.9 46.7 44.3 40.3 9.7
Other
11.4 12.1 16.1 16.2 19.2 18.1 18.9 23.9 26.3 25.6 26.4 8.7
Exchange Traded Markets

Equities
Futures
All Financial Markets
10.8 11.7 12.2 13.8 17.8 24.1 29.5 39.0 42.3 26.6 35.0
12.5
0.5 0.6 0.7 0.7 0.9 1.2 1.4 1.8 2.2 1.5 1.9
14.8
10.3 11.2 11.5 13.1 16.9 22.9 28.0 37.2 40.1 25.1 33.2
12.4
38.1 42.0 50.2 56.4 71.1 75.7 89.9 109.8 115.3 96.5 101.7
10.3
Market Share
% 2009-10
% Change on a Year Ago

OTC Markets
Foreign Exchange
Other
Exchange Traded Markets
-2.1 10.6 25.3 12.2 25.3 -3.1 17.0 17.2 3.0 -4.3 -4.6
65.6
-16.7 14.0 19.9 20.9 29.2 -1.4 23.9 12.8 -0.5 -5.1 -9.1
39.6
29.6
5.7
33.5
0.4
18.9
-6.1
4.4
26.9
10.0
-2.7
3.1
26.0
2.1 8.7 4.5 13.0 28.9 35.1 22.5 32.2 8.6 -37.1 31.6
34.4
Equities
24.9 18.0 29.5 4.8 17.7 32.1 24.7 24.9 21.2 -31.8 24.2 1.8
Futures
1.3 8.2 3.3 13.5 29.5 35.2 22.4 32.6 7.9 -37.3 32.0
32.6
All Financial Markets
-0.9 10.0 19.5 12.4 26.2 6.5 18.8 22.1 5.0 -16.3 5.4
100.0
CAGR = Compound Annual Growth Rate.

Sources: 2010 Australian Financial Markets Report and various previous year reports; Austrade
> 39
Transaction Services Payments System

The Payments System Board (PSB) of the Reserve Bank of Australia (RBA) oversees the payments system and is responsible
for promoting the safety and efficiency of the payments system. Through the Payment Systems (Regulation) Act 1998 and the
Payment Systems and Netting Act 1998, the Reserve Bank has a clear mandate to oversee the operation of the payments system.
The Australian Payments Clearing Association (APCA) is the Australian payments industrys principal self-regulatory body.
It is the primary vehicle for payments industry collaboration with a mandate to manage and develop regulations, procedures,
policies, and standards governing payments clearing and settlement within Australia.
The sophistication and competitive nature of Australias payments system is reflected in the changing nature of access points
to the system. Access to the payments system comes from bank and non-bank (credit union and building society) branches,
Bank@Post,55 ATMs and EFTPOS56 terminals.
Cash remains the most important payment instrument for small retail transactions and accounts for the highest volume of
transactions. Non-cash payments account for most of the value of payments in the Australian economy. It is estimated that
approximately A$220 billion57 of non-cash payments are made each business day, equivalent to 20 per cent of GDP.
Arrangements for clearing most payment instruments cheques, direct entry payments, ATMs, EFTPOS and high-value
payments are coordinated by APCA. Scheme credit and debit cards (MasterCard and Visa) and BPAY are cleared
independently of APCA.
The Reserve Bank of Australia announced in May 2010 that the Payments System Board is undertaking a strategic review of
innovation in the Australian payments system. The objective is to identify areas in which innovation in the Australian payments
system may be improved through more effective co-operation between stakeholders and regulators. Further details are
available at the RBAs website: http://www.rba.gov.au/media-releases/2010/mr-10-14.html
Appendix H outlines further details on Australias Payment and Settlement Systems.
Operations Processing
Outsourcing and offshoring of mid and back office activities undertaken by commercial banks and capital market participants
is a key strategy aimed at reducing costs and improving efficiencies. The following table provides an overview of relevant
operations functions and products for these firms.
Operations currently being carried out in Australia vary by company, reflecting a range of global and national strategies.
A 2008 survey of operations heads for 45 commercial banks found that almost 20 per cent of 3,500 operations staff in
Australia support activities outside Australia and New Zealand.58
The large Australian domestic banks undertake the bulk of their operations functions in Australia, with some evidence of
offshoring to London, Singapore and India. ANZ Bank, for example, has back office operations in Melbourne, Wellington,
Bangalore, Fiji, Singapore and Hong Kong, and has recently announced a new centre in Manila.
For foreign banks, there is a mix of models, including supporting their Australian and New Zealand operations from Australia,
supporting operations for the Asia-Pacific region, and using Australia as a global service centre within a follow-the-sun
operations model.
55. Bank@Post (formerly giroPost) provides a limited range of financial services at certain Australia Post offices on behalf of member financial institutions. In June 2010,
member institutions comprised Adelaide Bank, Bank of Queensland, BankWest, Bendigo Bank, Citibank, Commonwealth Bank, HSBC Bank Australia, ING Direct, Members
Equity, National Australia Bank, St. George Bank, B&E Ltd, GE Capital Finance Australia, Heritage Building Society, IMB Ltd, Maitland Mutual Building Society, RAMS Home
Loans, Wide Bay Australia Ltd and 56 credit unions. http://www.rba.gov.au/statistics/tables/xls/c08hist.xls
56. EFTPOS Electronic Funds Transfer at Point of Sale. Payment occurs through hand held terminals at the point of sale through a debit to a customers savings or cheque
account with corresponding credit to the merchants account.
57. RBA website, http://www.rba.gov.au/payments-system/about.html
58. Survey of members of the AFMA Operations committee, 2008.
Operations Functions and Products

Operations Functions
Operations Products
Staff supporting financial markets product processing
Money Market
Operational Risk
Debt
Market Risk
Foreign Exchange/OTC Derivatives
Credit Risk
Futures
Nostro Reconciliations & Investigations
OTC Interest Rate Derivatives
Accounting
Energy
Back Office Service Provider
Equities
Custodial Services
OTC Credit Derivatives
Trade Finance Processing
Precious & Base Metals
Equity Clearing Services
OTC Equity Derivatives
Future Clearing Services
Managed Funds
Stock Broking
Agricultural Commodities
Other
Real property
Margin Lending
Source: Invest Australia & AFOA, AFOA Member Survey: Summary Report, September 2006.
Australia is viewed as being best suited for operations related to more complex financial products, such as equities and
derivatives, treasury, non-automated confirmations, structured transactions, gold, electricity and carbon trading, over-thecounter transactions, corporate actions, risk management and process renewal and engineering.
Key criteria in selecting a location to establish or expand financial service operations include cost of labour, availability of skilled
labour with suitable financial services skills, as well as access to a proficient, English speaking and multi-lingual work force.
The skilled workforce is seen as Australias greatest strength. Australia has a very highly skilled, multilingual workforce, which
ranks favourably across the region and other major financial centres.
> 41
Workforce Skill Base Comparisons

Australia
China
India Hong Kong
Japan Singapore USA
UK
World Competitiveness Yearbook

2010 Rankinga in:
Attracting and Retaining
16
23
13
10
39
University Education
49
22
23
36
10
28
Labour Productivity (PPP)
55
58
22
25
21
14
Management Education
18
46
13
27
40
29
Global Competitiveness Report

2009-10 Rankingb in:
Secondary Enrolment Rate
Reliance on Professional Management
89
107
73
24
17
43
36
46
30
38
19
11
13
Quality of Scientific Research Institutions
10
35
25
34
15
12
Tertiary Enrolment Rate
13
80
100
66
32
29
30
UNDPs Human Development Report

2009 Rankingc in:
Human Development Index (HDI)
92
134
24
10
23
13
21
Sources: (a) Institute for Management Development (IMD), Switzerland, IMD World Competitiveness Online 1995-2010 (Updated: May 2010, 58 economies); (b) World
Economic Forum, Switzerland and Harvard University, Global Competitiveness Report 2009-10 (133 economies); (c) The United Nations Development Programme (UNDP),
Human Development Report 2009 (182 economies), Statistical Annex, Table H; Austrade
Australias major financial centres Sydney and Melbourne also have comparatively high proportions of their populations
with tertiary education and employed in financial services.
Selected Demographic Comparisons1 Mid Year 2009
(000)
Melbourne Sydney
New York City
London
Hong Kong
Singapore
Population
3,996 4,504 8,364 7,754 7,004 4,988
Labour Force
2,114 2,379 3,994 4,052 3,695 3,030
Employed Persons All Industries
1,979
2,223
3,609
3,676
3,504
2,906
Finance and Insurance
90
142
315
332
210
158
% of Total Employed Persons
4.5
6.4
8.7
9.0
6.0
5.4
179
251
446
426
102
53
4.5
5.6
5.3
5.5
1.5
1.1
Universities Total Enrolled Students

% of Total Population
1. For New York City, the closest available figure for population, mid-2008 is used. The latest data available for students is from 2008. State-wide public and private institution students (studying in
Australia) data was used for Sydney (New South Wales) and Melbourne (Victoria). For Singapore, data represents 2008 full-time enrolment. For London and Hong Kong, data represents 2008-09
academic year.
Sources: Australia: Australian Bureau of Statistics (ABS), cat. no. 3101.0, Australian Demographic Statistics, Dec 2009; ABS cat. no. 6291.0.55.001 Labour Force; ABS cat. no. 6291.0.55.003
E03_aug 94 Employed Persons by Sex, Industry, Capital City-Balance of State, Hours Worked; Department of Education, Employment and Workplace Relations; Austrade. USA: US Census
Bureau, Population Division, Table 27: Incorporated Places over 100,000 or more Inhabitants in 2008 population; State of New York and U.S. Bureau of Labour Statistics, Quarterly Census of
Employment and Wages; U.S. Department of Labour, Bureau of Labour Statistics, Status of the Civilian Labour Force. UK: Office of National Statistics (ONS), Statistical Bulletin, Population
Estimates June 2010; ONS Time series Labour Market Statistics 18A Regional Labour Market Summary (data downloaded 28 June 2010); London Development Agency, Mayor of London, The
Mayors Economic Development Strategy for London, Table 1: London Higher, HESA Fact sheets, Student numbers in London 2008-09. Hong Kong: Census and Statistics Department, Hong
Kong in Figures 2010 Edition, February 2010; Education Bureau. Singapore: Ministry of Manpower (MOM), online Statistics, Labour Force; MOM Research and Statistics Department, Labour
Market, Second Quarter 2009 Table 1.1; Statistics Singapore Ministry of Education, Education Factsheet 2009
Complementing the Australian university educated population is vocational and professional training that is focused specifically
on financial service operations. For example, TAFE NSW (Technical and Further Education commission) recently launched a
training certificate in financial services focused specifically on back office operations.59 In addition, the Australian Financial
Markets Association offers a range of professional training courses leading to a financial services operations designation.60
59. TAFE NSW is Australias leading vocational education and training provider and operates through 10 institutions and 130 campuses across the State of New South Wales.
http://www.tafensw.edu.au/howex/servlet/Course?Command=GetCourse&CourseNo=11343
60. http://www.afma.com.au/learning/qualifications/opsaccred.html
> 43
Regulation and Tax Environment

This section provides an overview of the regulation of banks and other financial institutions in Australia and summarises
the key considerations that are most relevant to a foreign financial institution considering the establishment of an Australian
operation (Australias taxation laws are separately considered in the section entitled Taxation). However, a full discussion
of all relevant considerations is beyond the scope of this publication and it is necessary to seek independent legal advice in
all cases.
Regulation of the financial system

Overview
Australias financial regulation framework is based on three separate agencies, operating on functional lines. These regulatory
bodies have prime responsibility for maintaining the safety and soundness of financial institutions, protecting consumers, and
promoting systemic stability through implementing and administering the regulatory regimes that apply to the financial sector.
Specifically:
(a) Australian Prudential Regulation Authority (APRA) is responsible for prudential regulation and supervision of ADIs
(including Australian incorporated banks, the Australian branches of foreign banks, building societies and credit unions),
as well as life and general insurance companies (including reinsurers and friendly societies) and most participants in the
superannuation (retirement savings) industry;
(b) Australian Securities and Investment Commission (ASIC) is the corporate, markets and financial services regulator,
responsible for market conduct and investor protection; and
(c) The Reserve Bank of Australia (RBA) is responsible for monetary policy, overseeing financial system stability and
oversight of the payments system.
Responsibility for the day-to-day supervision of financial institutions and markets lies with these individual regulatory
bodies. The broad framework for the regulation of the financial sector is determined by the Australian Government, with
the involvement of the Federal Treasury and the Council of Financial Regulators (whose membership consists of high-level
representatives of the RBA, Federal Treasury, APRA and ASIC).
In addition, the Australia Competition and Consumer Commission (ACCC) is responsible for competition policy, with a mandate
which extends across the entire economy, including the financial services sector. Further details of the key regulators are set
out below.
APRA is the key prudential regulator for the Australian financial system. APRAs core mission is to establish and enforce
prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made
by the institutions APRA supervises are met within a stable, efficient and competitive financial system. APRA also acts as the
national statistical agency for the Australian financial sector and plays a role in preserving the integrity of Australias retirement
incomes policy.
APRAs risk-based approach is underpinned by supervisory tools developed within the authority to ensure that risks are
assessed rigorously and consistently, that critical warning signs are identified early and that our supervisory response is
prompt and measured. APRA is provided with strong statutory powers to regulate and intervene in the operations of financial
institutions, including:
(a) authorisation or licensing powers, including the power to revoke a supervised entitys authorisation if it fails to meet
statutory requirements or prudential standards;
(c) powers to collect information, to conduct on-site examinations of supervised entities and to require third-party audits;
(b) powers to make, apply and enforce prudential standards;
and
(d) powers to act in certain circumstances to protect depositors, policy holders and superannuation fund members and to
maintain the stability of the financial system, including powers related to investigating, giving directions and assuming
control of supervised entities in difficulty. APRA can appoint a statutory manager to assume full control of an ADI.
APRA has developed a regulatory framework for ADIs under the Banking Act which is based on the banking supervision
principles published by the Basel Committee on Banking Supervision. The framework for prudential regulation includes
requirements regarding capital adequacy, credit risk, market risk, securitisation, liquidity, credit quality, large exposures,
associations with related entities, outsourcing, business continuity management, risk management of credit card activities,
audit and related arrangements for prudential reporting, governance and fit and proper management.
ASIC is an independent statutory body that is Australias corporate, markets and financial services regulator. It acts under
the Australian Securities and Investments Commission Act 2001 of Australia and administers the Corporations Act 2001 of
Australia (Corporations Act), including the provisions governing the operation of companies in Australia, corporate fundraising,
financial reporting, takeovers and compulsory buyouts and external administration/insolvency.
ASIC has responsibility for the investor protection regime that applies to the provision of financial services in, and into, Australia.
The regime includes licensing, conduct and disclosure provisions that apply to financial services providers (including ADIs), as
well as product disclosure provisions applicable to financial products. ASIC is responsible for monitoring compliance by market
and clearing and settlement facility licensees with the relevant legislative frameworks and the supervision of real time trading
on all of Australias domestic licensed markets.
ASIC is also responsible for (a) administering the market misconduct provisions of the Corporations Act, which cover market
manipulation, insider trading and misleading or deceptive conduct, and (b) national credit regulation which includes licensing
of all credit providers and credit service providers.
The RBA is responsible for maintaining stability of the overall financial system and monetary policy, promoting the safety and
efficiency of the payments system (through the PSB), managing the issuance of banknotes, providing banking services for the
Australian Government and managing Australias official reserve assets.
In exceptional circumstances, the RBA may provide liquidity support to an individual ADI if the institution was solvent and its
failure to make payments would have serious implications for the rest of the financial system. In assessing solvency, the RBA
would rely on APRAs judgment.
The RBA is also responsible for issuing financial stability standards for clearing and settlement facilities and it monitors
compliance with those standards.
Federal Treasury
The Treasury is an executive arm of the Australian Government and focuses primarily on economic policy. Amongst a range
of other domestic functions, the Federal Treasury also provides advice on policy processes and reforms for the promotion
of a secure financial system, sound corporate practices and safeguarding the public interest in matters such as consumer
protection and foreign investment.
The ACCC has responsibility for competition policy under the Competition and Consumer Act 2010 of Australia (formerly
known as the Trade Practices Act), which prohibits anti-competitive arrangements between competitors, such as price fixing,
market sharing and boycotts. The ACCCs consumer protection activities complement those of Australian state and territory
consumer affairs agencies which administer separate unfair trading legislation.
Other regulatory agencies
Other primary regulatory agencies and bodies in Australia include the Australian Taxation Office (ATO), the Australian Transaction
Reports and Analysis Centre (AUSTRAC), the Privacy Commissioner, and the Foreign Investment Review Board (FIRB).
> 45
Summary of available operating models

Overview
Under the Banking Act, an entity must not conduct banking business in Australia without authorisation from APRA. Banking
business includes any business that, to any extent, both (a) takes money on deposit (otherwise than as part payment for
identified goods or services), and (b) makes advances of money (or conducts certain other financial activities prescribed in the
Banking Act).
In addition, a person who carries on a financial services business in Australia is required to hold an Australian financial
services licence (AFSL) from ASIC or enjoy the benefit of an exemption from requirement to do so. Business is not defined
under the Corporations Act, but under the common law business imports notions of system, repetition and continuity and is to
be assessed by reference to the activities of the entity as a whole. The applicable AFSL must specifically cover each financial
service that a person intends to provide and refer to each specific financial product for which that service is to be provided
(see below). An AFSL will also stipulate whether the financial service is to be provided to wholesale clients or both retail and
wholesale clients.
Australian Credit Licence
Under the National Consumer Credit Protection Act 2009 (Cth) all persons that engage in credit activities in Australia are now
required to hold an Australian Credit Licence (ACL) from ASIC, or operate as a credit representative of an ACL holder, or enjoy
the benefit of an exemption from the requirement to do so. However, the regime only applies to credit provided to individuals
predominantly for personal, domestic or household purposes or for investment in residential property. A credit activity includes:
providing credit under a credit contract or consumer lease; suggesting or assisting in relation to a particular credit contract
or consumer lease; and acting as an intermediary between a lender or lessor and a consumer (in relation to a credit contract
or lease).
A licensee must comply with disclosure and conduct obligations including, for example, being a member of an external
dispute resolution scheme, providing debtors with disclosure documents (such as credit guides) and meeting overarching
requirements such as ensuring its credit activities are engaged in efficiently, honestly and fairly, ensure that debtors are not
entered into credit contracts that are unsuitable to them, and do not involve conflicts of interest that are disadvantageous
to debtors.
Available Options
In summary, there are four primary options available to a foreign financial institution considering the establishment of an
Australian operation:
In the case of a foreign bank:
(a) a representative office and then a branch authorised as a foreign ADI. APRA normally requires to a foreign bank
considering the establishment of an Australian branch to first open a representative office; or
(b) a new Australian-incorporated subsidiary authorised as an ADI.

In the case of a foreign financial institution which is not a bank:
(c) a branch operating as a foreign non-bank financial institution (NBFI); or

(d) a new Australian-incorporated subsidiary operating as a NBFI.
Other options may be available for specific types of foreign financial institutions (e.g., partnerships, collective investment
vehicles, co-operatives, government agencies and international organisations).
Insofar as regulatory approvals are concerned, the first two options involve applying to APRA for authorisation as a
representative office and/or an ADI and, except in the case of a representative office, are likely to involve applying to ASIC for
an AFSL (which can be made contemporaneously with an application to APRA). The third and fourth options will only involve
applying to ASIC for an AFSL. Depending on whether regulated credit activities is undertaken, the options will require applying
to ASIC or ACL.
Summary of requirements for each option

Type of entity
Process
Comments
A. Representative office
Consent from APRA
The activities of the representative office are

limited to those set out in APRAs guidelines.61
Consent to use word bank Required under section 66 of the Banking Act
which provides that a person must obtain consent
from APRA to assume or use the words bank,
banker, banking or cognate expressions in
Australia in connection with a financial services
business carried on by that person, whether that
business is conducted within or outside Australia.
Minimum entry standards Must be authorised as a bank in its home

jurisdiction, of substance and high standing, subject
to adequate prudential standards consistent with
Basel II and have received approval from home
regulator to establish representative office.
Operating conditions The activities of the representative office must be

confined to a pure liaison office. In particular, a
representative office cannot grant loans, enter into
derivatives, deal in or issue securities or buy or sell
foreign exchange see APRAs guidelines.
Register as a foreign company Application to ASIC.
ACL from ASIC ACL or appointment as credit representative

required if undertaking credit activities in Australia.
There is ASIC Guidance that assists applicants
apply for an ACL.62
Must comply with ongoing conduct obligations

under the NCCP Act, including responsible lending
requirements, and provide ASIC with an Annual
Compliance Certificate.
B. Branch as a foreign ADI
Consent from APRA Application must comply with APRAs guidelines.63
A branch of a foreign ADI is not permitted to accept

initial deposits (and other funds) from individuals and
non-corporate institutions of less than A$250,000.
They can, however, accept deposits and other funds
in any amount from incorporated entities, nonresidents and their employees. The branch must
also disclose that it is not subject to the depositor
protection provisions of the Banking Act.
APRA may impose conditions on the operations of
a foreign bank branch, especially during the initial
phase of operations.
Need only comply with some of APRAs prudential
standards for foreign bank branch (see following).
61. The guidelines are available at: http://www.apra.gov.au/ADI/upload/APRA_GL_ROFB_032007_ex.pdf.
62. Regulatory Guide 204 Applying for a Credit License is available at: http://www.asic.gov.au/asic/asic.nsf/byheadline/Regulatory+guides?openDocument#rg204.
63. The guidelines are available at: http://www.apra.gov.au/ADI/upload/ADI-Guidelines-11-4-08.pdf.
> 47
Type of entity
Process
Comments
Consent to use the word bank Required under section 66 of the Banking
Act.
Minimum authorisation criteria
Home jurisdiction requirements must

be authorised as a bank in its home
jurisdiction, of substance and high standing,
subject to adequate prudential standards
consistent with Basel II and have received
approval from home regulator to establish
a branch.
apital not required to maintain endowed

C
capital in Australia, but the foreign ADI must
be subject to comparable capital adequacy
standards in its home jurisdiction.
wnership subject to limits under

O
the Financial Sector (Shareholdings) Act
1998 of Australia (FSSA). Direct or indirect
holdings of 15 per cent of more are subject
to a national interest test and must be
approved by the Federal Treasurer.

Prudential standards must comply with
APRAs prudential standards in relation to
corporate governance, securitisation and
funds management, liquidity, credit quality,
large exposures, associations with related
entities, outsourcing, business continuity
management, risk management, audit
and information and prudential reporting
(although in some cases only some of
the provisions of the prudential standards
apply to branches of foreign banks). APRA
can also impose additional, entity specific
prudential requirements where it believes
they are necessary.

usiness plan applicants must provide

B
APRA with a 3-5 year business plan and
APRA will not authorise a foreign bank
as an ADI unless the business plan
demonstrates that a real and substantial
business is to be carried on in Australia.
APRA also expects that the vast majority of
business undertaken by the foreign bank
with Australian customers (excluding nonAustralian operations of such customers)
will be undertaken through the branch
in Australia, unless there are sound and
prudent business reasons for particular
businesses or financial accommodation to
be provided by branches outside Australia.
Type of entity
Process
Comments
Register as a foreign company
Application to ASIC.
AFSL from ASIC Required if the branch proposes providing certain

financial services (such as advice) and financial
products (such as, dealing in or issuing securities,
derivatives, foreign exchange contracts) see below.
Audit and other reports must be provided to ASIC on

an ongoing basis. There are exemptions from some
of the audit obligations where the holder of an AFSL
is a foreign ADI where equivalent reports prepared
for the overseas regulator of the foreign ADI are
lodged with ASIC.


There is ASIC Guidance that assists applicants apply
for an ACL.

C. L
ocally-incorporated
Consent from APRA Application must comply with APRAs
subsidiary as an ADI guidelines and are subject to the same prudential
standards and legislation as local banks. A locally
incorporated ADI can undertake all types of banking
business.
APRA may impose conditions on the operations of a
newly established bank, especially during the initial
phase of operations.

Consent to use the word bank Required under section 66 of the Banking Act.
Minimum authorisation criteria
ome jurisdiction requirements must have

H
received approval from home regulator to establish a
local bank subsidiary.
apital a minimum capital base of A$50 million.

C
Locally incorporated ADIs are currently required to
maintain at all times a minimum capital ratio of 8 per
cent, of which at least half must be made up of a
Tier 1 capital (i.e., a minimum Tier 1 capital ratio of
4 per cent). Newly established ADIs may be subject
to a higher minimum capital ratio in their formative
years, depending on the risk profile of the proposed
operations.
Ownership subject to limits under the Financial

Sector (Shareholdings) Act 1998 of Australia (FSSA).
Direct or indirect holdings of 15 per cent of more
are subject to a national interest test and must be
approved by the Federal Treasurer.
> 49
Type of entity
Process
Comments

Prudential standards must comply with all
APRAs prudential standards (including in relation
to corporate governance, capital adequacy,
securitisation and funds management, liquidity,
credit quality, large exposures, associations with
related entities, outsourcing, business continuity
management, risk management, audit and
information and prudential reporting). APRA can
also impose additional, entity specific prudential
requirements where it believes they are necessary.

Business plan applicants must provide APRA
with a 3-5 year business plan.

Establish subsidiary
AFSL from ASIC Required if the ADI proposes providing certain

Audit and other reports must be provided to ASIC

on an ongoing basis.


apply for an ACL.

D. Foreign subsidiary branch
as a NBFI

Register as a foreign company
AFSL from ASIC Required if the branch proposes providing certain




There is ASIC Guidance that assists applicants apply
for an ACL.


Financial requirements for

In summary, a NBFI holder of an AFSL must,
non-ADI holders of an AFSL on an ongoing basis, (i) at all times, have positive
net assets, (ii) at all times, be solvent (i.e., be able
to pay its debts as and when they become due and
payable), (iii) have sufficient cash resources to cover
the next three months expenses with adequate
Type of entity
Process
Comments
cover for contingencies, (iv) if holding client money

or properties which equal or exceed A$100,000 in
value, have A$50,000 in surplus liquid funds, and (v)
if incurring adjusted liabilities or contingent liabilities
equal to or exceeding A$100,000 in providing
a financial service by entering into transactions
with clients, have adjusted surplus liquid funds
of between A$50,000 and A$100,000,000 in
accordance with ASICs requirements.
Cannot use the word bank APRA will not grant consent under section 66 of
the Banking Act to a NBFI.
E. Locally incorporated subsidiary

as a NBFI

Establish subsidiary
AFSL from ASIC Required if the NBFI proposes providing certain

derivatives, foreign exchange contracts)
see below.



apply for an ACL.


Financial requirements fo
non-ADI holders of an AFSL
As for a foreign subsidiary branch as a NBFI

(see above).
Cannot use the word bank APRA will not grant consent under section 66 of
the Banking Act to a NBFI.
The authorisation and application processes

The first step in establishing a representative office, foreign branch or locally incorporated ADI in Australia is to apply to APRA
for authorisation to do so and to use the words bank, banker, banking and cognate expressions. There is a no formal
application form, but the usual practice is to submit a letter (together with attachments) that satisfy the criteria in the relevant
guidelines published by APRA.
Usually, the minimum time for APRA to approve an application for a representative office is 3-6 months from submission
of an application with all required information attached. The process for authorisation as a branch of a foreign ADI or a
locally incorporated ADI is longer and can take up to 12 months (or longer in certain circumstances) from the date the initial
application is made to APRA.
The process for applying for an AFSL is called eLicensing, which is an electronic licence application process. The process
requires an applicant to identify the specific financial services and financial products it wishes to provide and the types of
customers to whom these financial services and products are to be provided. A list of the supporting documentation (known
as proofs) required will be produced automatically by the eLicensing service on the basis of that information.
> 51
The proofs are designed to demonstrate to ASIC how the applicant meets, or will meet, the AFSL conditions. Generally, the
proofs will either be existing documents or a description of systems and processes. The proofs may be both specific to the
entity applying for the AFSL or may cover a corporate group.
It is not possible to commence the eLicensing process until an Australian entity is established or a foreign branch is registered
and an Australian Company Number (ACN) is received from ASIC. On lodging a complete application, ASIC aims to decide
whether to grant or vary an AFSL within 28 days of receiving a complete application although can take longer if it involves
complex issues or information is incomplete.
The process for applying for an ACL can occur by completing and lodging an online application form and paying the
applicable application fee. The process is similar to the one outlined above in relation to an AFSL.
An applicant is not automatically entitled to a credit licence, but must meet the requirements for a credit license, including
being able to comply with the general conduct obligations under the National Credit Act, which aim to ensure that the credit
business operates properly; and satisfy the fit and proper person requirements to engage in credit activities.
Australian financial services licences

Introduction
As noted above, person who carries on a financial services business in Australia is required to hold an AFSL from ASIC or
enjoy the benefit of an exemption from requirement to do so.
Although there are numerous exemptions available for particular financial services and/or financial products, there are few
exemptions of general application. ASIC has provided a number of class order exemptions of general application for some
regulated foreign financial institutions which operate in jurisdictions which have a similar level of investor protection to Australia.
These exemptions only permit financial services to provided to wholesale clients (see below), are subject to some other
conditions and involve submitting a standard form deed of reliance to ASIC and providing certain information to ASIC every
six months.
What is a financial service?
A person provides a financial service if they engage in certain activities, which include:
(a) providing financial product advice;

(b) dealing in a financial product;
(c) making a market for a financial product;
(d) operating a registered managed investment scheme (i.e., collective investment vehicles); and
(e) providing a custodial or depository service.
What is a financial product?
Financial product is defined in general terms and there are specific inclusions and exclusions. The general definition is that a
financial product is any facility through which a person:
(a) makes a financial investment;

(b) manages financial risk; or
(c) makes non-cash payments.
This applies even if the facility is acquired for some other purpose.
The specific inclusions to the definition of financial product illustrate the wide scope of the concept. Specific inclusions are
equity and debt securities, interests in managed investment schemes, derivatives, foreign exchange contracts, most insurance
contracts, most superannuation (i.e., pension) products, most deposit taking facilities provided by Australian ADIs and
government debenture and bond issues.
The specific exclusions to the definition are generally products that are more suitably regulated under some other regime
(such as credit facilities and a facility for the exchange and settlement of non cash payments betwen providers of non cash
payment facilities).
Loans in Australia can be structured as a credit facility or, for tax reasons, as an issue of debentures (i.e., a type of debt
security). If the loan is a bilateral or syndicated credit facility, then there should be no particular licensing requirements as
credit facilities are not financial products for the purposes of the AFSL regime. However, if the loan is structured as an issue of
debentures, which is a financial product, then it may be necessary for a lender to hold an AFSL. More structured transactions
may involve derivatives, foreign exchange contracts (excluding most spot transactions) or other financial products, which will
also require the provider of those financial products to hold an AFSL.
Retail and wholesale clients
An AFSL will also stipulate whether the financial service is to be provided to wholesale clients or both retail and wholesale
clients. In summary, a person is a wholesale client if at least one of the following four tests applies (all other persons are retail
clients):
(a) a value test: the consideration payable for the investment is at least A$500,000 (or such other amount set by regulation);
(b) a business test: the product or service is provided in connection with a business that is not a small business (this
normally means at least 20 employees);
(c) an individual wealth test: the clients net assets are at least A$2.5 million or income for each of the last two years is at
least A$250,000 (or such other amounts set by regulation); and
(d) a professional investor (as broadly defined in the Corporations Act) test.
Other considerations
Privacy laws
The Privacy Act 1988 of Australia (Privacy Act) requires that personal information must not be collected unless the person
concerned either consents or is informed why it is being collected, who will use it, and how the person may access it and
correct it, if necessary.
Further, the Privacy Act requires that such personal information not be used for a purpose other than that for which it was
collected and not be disclosed to anyone else unless the person concerned has consented or the law requires it.
Anti-money laundering and similar laws
AUSTRAC acts as the regulator for both the Financial Transactions Report Act 1988 of Australia and the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 of Australia. The reporting of financial transactions, including:
(a) cash transactions of A$10,000 or more or the foreign currency equivalent;

(b) suspicious transactions; and
(c) international funds transfer instructions.
is required, as well as the verification of the identity of persons who are signatories to accounts. Financial institutions are
required to establish a compliance plan to ensure that the reporting and other obligations under both Acts are satisfied.
New laws to change the way to take security in Australia
The Personal Property Securities Act 2009 of Australia (PPSA) commenced on 15 December 2009, but will not apply until a
date to be announced in October 2011.
Once the PPSA begins to apply, it will have a retroactive effect on security interests and security agreements arising before
that time. The PPSA will establish a national system for the registration of security interests in personal property (i.e., all
property other than land), whether given by a company or a natural person, together with new rules for the creation, priority
and enforcement of security interests in personal property.
It will radically alter many long-standing rules relating to title and the taking of security and will result in significant changes to
secured transactions and lending practices. It extends the concept of security to capture many transaction not now registrable
or considered to be a security interest, such as assignments of receivables, leases of property, title retention arrangements
and flawed asset arrangements.
> 53
Taxation
This section summarises the Australian taxation laws that are most likely to apply when a foreign financial institution sets up an
Australian operation. However, a full discussion of all relevant issues is beyond the scope of this publication and it is necessary
to seek independent tax advice in all cases.
Australia has also entered into tax treaties with over forty countries to prevent double taxation and allow co-operation between
Australia and overseas authorities in enforcing their respective tax laws. These treaties are commonly referred to as double
tax agreements or DTAs and can apply when a foreign financial institution from a relevant country sets up an Australian
operation.
Summary
The following table summarises the key Australian tax considerations in relation to each of the alternative business structures
that could be adopted when establishing a financial institution in Australia.
Type of entity
Key tax considerations
1. Representative office
Activities limited solely to liaison and
marketing activities, and no banking
business conducted in Australia.

No significant Australian tax issues should generally arise on the basis
that:
The foreign bank should not be held to be carrying on business

through a permanent establishment in Australia; and
The foreign bank should not otherwise be deemed to have a taxable

presence in Australia.

Not generally applicable.
2. Branch authorised as a foreign ADI

The Australian taxable income of the branch as a foreign ADI will
generally be subject to Australian tax at the ordinary corporate rate
(currently 30 per cent).
The funding of the branch will generally be treated in the following way:
Interest withholding tax (IWT) will generally apply to offshore interbranch funding at the rate of 5 per cent.1
IWT will also generally apply to other offshore funding at the rate of 10
per cent1, subject to relief under an applicable DTA (e.g., exemption for
qualifying financial institutions).
Exemption from IWT may be available in relation to publicly offered
funding from unrelated lenders (commonly referred to as the section

128F exemption).
1. Refer to the proposed reduction in IWT that follows.
Type of entity
Key tax considerations
3. Locally-incorporated subsidiary
authorised as an ADI, foreign subsidiary
branch operating as a foreign non-bank
financial institution (NBFI), or locally
incorporated subsidiary operating as
a NBFI

The Australian taxable income of each entity will generally be subject to
Australian tax at the ordinary corporate rate (currently 30 per cent).

The funding of each entity will generally be treated in the following way:
IWT will generally apply to offshore funding at the rate of 10 per cent ,
1
subject to relief under an DTA (e.g., exemption for qualifying financial

institutions).
Exemption from IWT may be available in relation to publicly offered
funding from unrelated lenders (commonly referred to as the section

128F exemption).
1. Refer to the proposed reduction in IWT that follows.

The business profits of an Australian branch or an Australian subsidiary of a foreign financial institution will generally be subject
to Australian tax at the ordinary corporate rate (currently 30 per cent). The Government has announced that it intends to reduce
the corporate tax rate to 29 per cent from the 2013-14 income year.
In contrast, a foreign financial institution which merely carries on activities of a preparatory or auxiliary nature in Australia
(e.g., through a representational office) will not generally be liable to pay Australian income tax, provided that the activities
of the office are limited solely to liaison and marketing activities, and the office does not conduct any banking business in
Australia.

When is interest withholding tax payable?
A foreign financial institution that has an Australian subsidiary or an Australian branch may be subject to IWT. Broadly, under
Australian tax legislation, interest that is paid to a non-resident is generally subject to withholding tax where the payment is
made by an Australian resident or a non-resident acting through an Australian permanent establishment (e.g., an Australian
branch). No IWT is generally imposed on domestic payments of interest (including payments made to foreign banks which are
in receipt of the funds through a permanent establishment in Australia).
IWT is imposed at the rate of 10 per cent, but may be reduced depending on the terms of any applicable DTA between
Australia and the jurisdiction of the recipient.
Exemptions from IWT
Australian tax law does provide for a number of exemptions to IWT. These include, where:
interest is paid on publicly offered debentures, non-equity shares, certain other prescribed debt interests and certain
syndicated loans (commonly referred to as the section 128F exemption);
interest payments qualify for exemption under an applicable DTA (e.g., exemption for qualifying financial institutions);
interest is paid by offshore banking units (OBU) in relation to certain borrowings; and
the payee is specifically exempt from IWT (e.g., the payee is exempt from tax in both Australia and home country, or the
payee is an exempt foreign pension fund).
> 55
The exemptions that are most likely to apply to a foreign financial institution acting through an Australian subsidiary or an
Australian branch are outlined below.
Exemption for certain publicly offered debentures (section 128F exemption)
In broad terms, under Australian taxation law, interest paid on publicly-offered debentures, non-equity shares and prescribed
debt instruments is exempt from IWT if the following conditions are met:
(a) the issuer is a company which is a resident of Australia (or a non-resident carrying on business through an Australian
branch) when it issues debt instruments and at the time when interest is paid;
(b) the debt instruments were issued under an offer which satisfies the public offer test (which is defined under Australian
tax legislation); and
(c) the issuer does not know, or have reasonable grounds to suspect, that:

(i) at the time of issue the debt instruments would be acquired by an associate of the issuer; and

(ii) at the time of the payment of interest, the payee is an associate of the issuer.
Additional requirements apply before interest paid on certain syndicated loans will be exempt from IWT.
Exemptions under Australias new DTAs
The Australian Government has entered into new DTAs (New Treaties) with a number of countries (Specified Countries) which
contain certain exemptions from IWT. For example, New Treaties have been concluded with each of Finland, France, Japan,
New Zealand, Norway, South Africa, the United Kingdom and the United States.
Broadly, an exemption from IWT is available in respect of interest derived by:
(a) the government and certain governmental authorities and agencies of the Specified Country; and
(b) a financial institution which is a resident of a Specified Country and which is unrelated to and dealing wholly
independently with the payer of interest.64 This includes interest payments to a bank or other entity that derives most of
its profits by carrying on a business of raising and providing finance.
Notional borrowing by an Australian branch of a foreign bank

Where a foreign bank conducts business in Australia through an Australian branch, special taxation rules will apply in relation
to certain financing transactions between the foreign bank (e.g., head office) and its Australian branch.
Broadly, where the foreign bank makes an amount available for use by the Australian branch and the amount is recorded in
the branchs accounting records as having been provided by the bank to the branch, the law treats the Australian branch and
the foreign bank as separate legal entities and the Australian branch is taken to have borrowed the amount from the foreign
bank. Where the Australian branch records a payment of interest in respect of this notional borrowing, the notional interest is
deemed to have been paid to the foreign bank and the branch and is subject to IWT at the reduced rate of 5 per cent.
This special tax treatment does not apply to locally incorporated subsidiaries of a foreign bank. Accordingly, funding
transactions between a foreign bank and its Australian subsidiary may still be subject to IWT at the usual rate of 10 per cent.
Deductibility of IWT
Generally, a branch or subsidiary of a foreign financial institution which pays interest should be entitled to a tax deduction
in respect of the interest paid when calculating its Australian taxable income. This deduction should be gross of any IWT
imposed on the interest payments. If the payer of interest was required to gross-up payments to the payee, the payer should
also be entitled to a tax deduction for the grossed-up amount. No deduction will generally arise to the extent that there is a
failure to withhold an amount on account of IWT.
Phasing down Australian IWT for financial institutions
The Australian Government announced in the 2010-11 Federal Budget that it would phase down the IWT payable by financial
institutions on most interest paid on offshore borrowings, including when an Australian subsidiary or an Australian branch of a
foreign financial institution pays interest on borrowings from their overseas parent.
64. However, interest paid under a back-to-back loan or an economically equivalent arrangement will not qualify for this exemption.
The following table summarises the current and proposed IWT position:
Type of borrowing
Current IWT position
Future IWT position

From 2013-14
From 2014-15
Financial institution borrows from a foreign

0%
7.5%
financial institution (where not exempt under a DTA)
Foreign bank branch borrows from overseas head office
5%
2.5%
Financial institution borrows from offshore retail deposits

10%
7.5%
(proceeds used and traced to Australian operations)
5%
(aspirational target of zero)
Exempt
5%
(aspirational target of zero)
Financial institution borrows in a section 128F compliant manner
Exempt
Exempt
Exempt
Offshore banking unit (borrows and on-lends offshore)
Exempt
Exempt
Exempt
10%
10%
10%
Financial institution borrows from non-resident retail deposits

held in Australia
Source: Treasurers press release number 035/2010 issued on 11 May 2010
Special treatment for offshore banking units

Entities that are OBUs are effectively subject to a reduced tax rate of 10 per cent on eligible income (rather than at the general
corporate tax rate of 30 per cent) and are not required to pay IWT on certain borrowings.
An entity becomes an OBU when its OBU status is declared by the Treasurer in a Gazette notice. Generally, OBU status is
generally available for ADIs, state banks, registered life insurance companies, certain dealers in foreign exchange, and funds
management companies.
A recent report by the Australian Financial Centre Forum Australia as a Financial Centre Forum: Building on our strengths
recommended that the Government improve Australias attractiveness as a financial hub by publicising the OBU regime more
widely and by simplifying the process for obtaining OBU status.
Thin capitalisation
Australias thin capitalisation rules seek to limit the amount of debt used to fund Australian operations or investments. In very
broad terms, this is achieved by disallowing debt deductions (such as interest payments) that an entity can claim against
Australian assessable income where the entity is too thinly capitalised.
The thin capitalisation rules are complex and need to be considered on a case-by-case basis; however, they are normally
manageable for financial institutions which operate in Australia.
> 57
Useful Links
Primary Regulators
Australian Government
Australian Bureau of Statistics
Australian Taxation Office
Australian Trade Commission
Australian Transaction Reports and Analysis Centre
Federal Treasury
Foreign Investment Review Board
Future Fund
MoneySmart
Other
Abacus (credit union and building society industry body)
Alternative Investment Management Association
Association of Superannuation Funds of Australia
Australian Accounting Standards Board
Australian Bankers Association
Australian Equipment Lessors Association
Australian Finance Conference
Australian Financial Markets Association
Australian Institute of Superannuation Trustees
Australian Payments Clearing Association
Australian Securities Exchange
Australian Securitisation Forum
Australian Private Equity & Venture Capital Association
Financial Planning Association
Financial Services Council
Financial Services Institute of Australasia
Fund Executives Association Ltd
www.apra.gov.au
www.asic.gov.au
www.rba.gov.au
www.abs.gov.au
www.accc.gov.au
www.ato.gov.au
www.austrade.gov.au
www.austrac.gov.au
www.treasury.gov.au
www.firb.gov.au
www.futurefund.gov.au
www.moneysmart.gov.au
www.abacus.org.au
www.aima-australia.org
www.superannuation.asn.au
www.aasb.com.au
www.bankers.asn.au
www.aela.asn.au
www.afc.asn.au
www.afma.com.au
www.aist.asn.au
www.apca.com.au
www.asx.com.au
www.securitisation.com.au
www.avcal.com.au
www.fpa.asn.au
www.ifsa.com.au
www.finsia.com
www.feal.asn.au
Appendix A Banking Institutions

Domestic Banks Four Major Banks
The Bank of Nova Scotia
The Peoples Bank of China
Union Bank of India
Wells Fargo Bank, National Association
Foreign Bank Branches
Domestic Banks Other
Bank of America, National Association
AMP Bank Ltd
Bank of China Ltd

Bank of Western Australia Ltd

65
Barclays Capital
BNP Paribas
Macquarie Bank Ltd
China Construction Bank Corporation
Citibank, N.A.
Rural Bank Ltd
Credit Suisse AG
Suncorp-Metway Ltd
Foreign Bank Subsidiaries

Citigroup Pty Ltd
Foreign Bank Representative Offices
Agricultural Bank of China
Banco Bilbao Vizcaya Argentaria S.A.
Banco Santander, S.A.
Bank Hapoalim B.M.
Bank of Baroda
Bank of Communications Co., Ltd.
Bank Leumi Le-Israel BM
Bank of Valletta p.l.c
China Construction Bank Corporation
Commerzbank AG
Credit Industriel et Commercial
National Bank of Greece SA
Saxo Bank A/S
First Commercial Bank

Industrial and Commercial Bank of China Ltd
ING Bank N.V
JPMorgan Chase Bank, National Association
Lloyds TSB Bank plc
Mega International Commercial Bank Co., Ltd.
Mizuho Corporate Bank, Ltd.
Oversea-Chinese Banking Corporation Ltd
Rabobank Nederland
Royal Bank of Canada
Socit Gnrale
Standard Chartered Bank
State Bank of India
State Street Bank and Trust Company
Taiwan Business Bank
The Bank of New York Mellon
The Northern Trust Company
The Royal Bank of Scotland N.V.
The Royal Bank of Scotland PLC
The Toronto-Dominion Bank
UBS AG
United Overseas Bank Ltd
WestLB AG
65. Bank of Western Australia Ltd is a wholly owned subsidiary of the Commonwealth Bank of Australia.
> 59
Appendix B Credit Unions and Building Societies

Credit Unions
Goldfields Credit Union Ltd
Alliance One Credit Union Ltd
Goulburn Murray Credit Union Co-operative Ltd
Allied Members Credit Union Ltd
Heritage Isle Credit Union Ltd
AMP Credit Union Ltd
Holiday Coast Credit Union Ltd
Australian Central Credit Union Ltd
Horizon Credit Union Ltd
Australian Country Credit Union Ltd (trading as Reliance

Credit Union)
Hunter United Employees Credit Union Ltd
Australian Defence Credit Union Ltd
Intech Credit Union Ltd
AWA Credit Union Ltd
La Trobe University Credit Union Co-Operative Ltd
Bananacoast Community Credit Union Ltd
Laboratories Credit Union Ltd
Bankstown City Credit Union Ltd
Latvian Australian Credit Co-operative Society Ltd
Berrima District Credit Union Ltd
Lithuanian Co-operative Credit Society Talka Ltd
Big Sky Credit Union Ltd
Lysaght Credit Union Ltd
CAPE Credit Union Ltd
MacArthur Credit Union Ltd
Central Murray Credit Union Ltd
Macquarie Credit Union Ltd
Central West Credit Union Ltd
Manly Warringah Credit Union Ltd
Circle Credit Co-operative Ltd
Maritime, Mining & Power Credit Union Ltd
Coastline Credit Union Ltd
MCU Ltd
Collie Miners Credit Union Ltd
MECU Ltd
Community Alliance Credit Union Ltd
Melbourne University Credit Union Ltd
Community CPS Australia Ltd
MemberFirst Credit Union Ltd
Community First Credit Union Ltd
MyState Financial Ltd
Country First Credit Union Ltd
New England Credit Union Ltd
Credit Union Australia Ltd
Newcom Colliery Employees Credit Union Ltd
Credit Union SA Ltd
Northern Inland Credit Union Ltd
Defence Force Credit Union Ltd
Nova Credit Union Ltd
Dnister Ukrainian Credit Co-operative Ltd
Old Gold Credit Union Co-operative Ltd
EECU Ltd
Orange Credit Union Ltd
Electricity Credit Union Ltd
Phoenix (N.S.W.) Credit Union Ltd
Encompass Credit Union Ltd
Plenty Credit Co-operative Ltd
Family First Credit Union Ltd
Police & Nurses Credit Society Ltd
Fire Brigades Employees Credit Union Ltd
Police Association Credit Co-operative Ltd
Fire Service Credit Union Ltd
Police Credit Union Ltd
Firefighters & Affiliates Credit Co-operative Ltd
Pulse Credit Union Ltd
First Choice Credit Union Ltd
Qantas Staff Credit Union Ltd
First Option Credit Union Ltd
Queensland Country Credit Union Ltd
Fitzroy & Carlton Community Credit Co-Operative Ltd
Queensland Police Credit Union Ltd
Ford Co-operative Credit Society Ltd
Queensland Professional Credit Union Ltd
Gateway Credit Union Ltd
Queensland Teachers Credit Union Ltd
Geelong & District Credit Co-operative Society Ltd
Queenslanders Credit Union Ltd
Industries Mutual Credit Union Ltd
Railways Credit Union Ltd
Building Societies
Resources Credit Union Ltd
ABS Building Society Ltd
R.T.A. Staff Credit Union Ltd
B & E Ltd
Select Credit Union Ltd
Greater Building Society Ltd
Service One Credit Union Ltd
Heritage Building Society Ltd
SGE Credit Union Ltd
Hume Building Society Ltd
Shell Employees Credit Union Ltd
IMB Ltd
South West Slopes Credit Union Ltd
Lifeplan Australia Building Society Ltd
Southern Cross Credit Union Ltd
Maitland Mutual Building Society Ltd
South-West Credit Union Co-Operative Ltd
Newcastle Permanent Building Society Ltd
Summerland Credit Union Ltd
The Rock Building Society Ltd
Sutherland Credit Union Ltd
Wide Bay Australia Ltd
Swan Hill Credit Union Ltd

Sydney Credit Union Ltd
Tartan Credit Union Ltd
Teachers Credit Union Ltd
The Broken Hill Community Credit Union Ltd
The Capricornian Ltd
The Gympie Credit Union Ltd
The Police Department Employees Credit Union Ltd
The University Credit Society Ltd
Traditional Credit Union Ltd
TransComm Credit Co-operative Ltd
Victoria Teachers Credit Union Ltd
Wagga Mutual Credit Union Ltd
Warwick Credit Union Ltd
WAW Credit Union Co-Operative Ltd
Woolworths Employees Credit Union Ltd
Wyong Council Credit Union Ltd
> 61
Appendix C Foreign Retail Banks in Australia

Bank of China
In 1985, Bank of China recommenced its operations in Australia and has since set up its Australian headquarters in Sydneys
York Street and established seven branches in Sydney, Melbourne, Perth and Brisbane. In 2005, Bank of China (Australia)
Limited, the Australian subsidiary of Bank of China, was established in Sydney.
The bank offers a wide range of corporate and personal banking services in Australia and targets the local Chinese
community, Chinese students studying in Australia, Chinese companies investing in Australia, and Australian businesses with
trade and investment links to China.
www.bocau.com.au
Citibank
Citibanks presence in Australia extends back to 1971. The organisation was the first foreign bank to be granted a banking
license in 1985 and today provides consumer, corporations, governments and institutions a full range of financial products
and services. Citi, the parent company of Citibank in Australia, employs approximately 2,300 staff, and services over 1 million
customers in Australia.
Citibank is one of the largest foreign banks servicing Australias retail banking sector. In Australia, Citibank holds approximately
A$6.2 billion in retail deposits, and has more than A$13 billion in loans and advances to households. Citibank is one of the largest
credit card issuers in Australia, ranking fifth in terms of credit card loans outstanding, just behind the big four domestic banks.
www.citibank.com.au
HSBC
HSBC operates through a network of 35 branches and offices in Australia. HSBC first entered Australia through the
establishment of a finance company in 1965 and obtained a full banking license in 1986. With retail deposits as at September
2010 of approximately A$3.9 billion and A$7.3 billion in loans and advances to households, HSBC is the third largest foreign
bank competitor in the retail banking sector.
HSBC offers a full range of consumer, commercial and institutional banking services. They target their retail services to highend expatriates and customers with continued links between Asia and Australia.
www.hsbc.com.au
ING Direct
ING DIRECT launched in Australia in 1999 and pioneered branchless banking. It has grown to become the fifth largest retail
bank in Australia and largest foreign bank competitor in the retail banking sector. ING Direct has approximately 1.4 million
customers, A$17 billion in retail deposits and A$36.7 billion in loans and advances to the household sector.
The bank first entered Australia with an online interest earning savings deposit account. Most recently, ING DIRECT expanded
its deposit service offering to include an everyday transaction account Orange Everyday. ING DIRECT also offers home loans
and business banking and deposit services. Headquartered in Sydney, ING DIRECT employs some 900 people in Australia.
www.ingdirect.com.au
Rabobank
Rabobank first entered Australia in 1994, through the acquisition of Primary Industry Bank of Australia, which was renamed
Rabobank Australia in 2003, the same year Rabo acquired Lend Lease Agro Business in Australia. Rabobank operates through
51 branches throughout Australia and targets primarily the rural and agricultural sector.
The bank entered the retail banking space in May 2007 with the launch of its RaboPlus internet bank, which was rebranded
RaboDirect in May 2010. RaboDirect offers a range of high interest savings, term deposits and online access to a selection of
wholesale managed funds. As at September 2010, Rabobank held A$1.8 billion in retail deposits.
www.rabodirect.com.au
> 63
Appendix D International Expansion

of Australias Largest Banks
ANZ has some 1,346 branches and offices worldwide with operations in Australia, New Zealand, 15 Asian markets (including
the Middle East), 12 Pacific countries, Europe (London and Frankfurt) and New York. The focus of its current growth strategy is
the Asia-Pacific, with the aim of becoming a super-regional bank increasing its presence in the region to around 20 per cent
of earnings by 2012.
To achieve this vision, ANZ has been investing significantly in the region, building branch networks in Indonesia, Vietnam and
China through a combination of organic growth and strategic acquisition. The bank recently acquired select businesses from
Royal Bank of Scotland in Singapore, Taiwan, Indonesia, Philippines and Hong Kong.
In China, ANZ has seven branches and sub branches and holds the maximum allowable investments in two significant
Chinese banks: Shanghai Rural Commercial Bank and Bank of Tainjin. ANZ anticipates having twenty outlets open by 2013.
Its China expansion strategy received a boost when ANZ was granted local incorporation approval in September 2010. This
means ANZ can apply for a renminbi licence and will allow the bank to provide domestic retail and business banking services
along with foreign currency products to its institutional clients. In Taiwan, the bank has grown from one branch with a small
institutional client base in 2008 to a pan-island network of 22 branches serving 1 million clients. In Hong Kong, ANZ has
grown from a single branch serving institutional and private banking clients in 2008 to having six branches with full retail,
wealth, private banking, institutional and commercial banking capabilities.
ANZ is also the leading bank within the Pacific region, with operations in 12 Pacific countries. The bank was granted a
universal bank licence in the Philippines in January 2010 and has 28 branches across 11 cities with almost 1,000 employees
in Indonesia. In the greater Mekong region (Vietnam, Cambodia and Laos) the banks aim is to become the leading foreign
bank. ANZ currently has 11 offices, 100 ANZ branded ATMS and 1,000 shared ATMs, as well as an extensive EFTPOS network
and call centre in Vietnam. In Cambodia, ANZ has a 55 per cent owned joint venture with 18 branches, and 124 ATMs serving
90,000 customers; and in Laos, ANZ is the only international bank, with three branches and nine ATMs.
www.anz.com.au
The Commonwealth Bank of Australia (CBA) has operations and investments globally; however, the bulk of its international
growth initiatives are centred in the Asia-Pacific region, primarily in China, Indonesia, Vietnam and India. The Banks Asian
Growth strategy is focused on building long-term growth opportunities in the areas of banking, wealth and insurance/
bancassurance, in emerging markets where there are young and well-educated populations, strong economic growth and
strong, cultural and trade linkages with Australia.
In Europe, the bank has approximately 100 employees and has had a branch in the UK since 1913. CBA established a second
European branch in Malta in 2005, focused primarily on commercial banking solutions in infrastructure and utilities, corporate
lending, and asset finance. In North America, the banks New York branch was established in 1977 and focuses on corporate
banking activities in infrastructure, natural resources and global market services (foreign exchange, derivatives, commodities,
fixed income products, money markets and private placements).
In the Asia-Pacific, CBA has operations in China, Hong Kong, Indonesia, Japan, Singapore, Vietnam and India. The banks
Indonesian subsidiary employs more than 1600 people and has been operating for more than 14 years. It offers retail banking
services and foreign exchange through 84 branches and 100 ATMs across 22 Indonesian cities. CBA established its Ho
Chi Minh City branch in 2008 after having had a representative office in Hanoi since 1994. The bank provides retail banking
services (savings accounts, loans, money transfers) in Vietnam, as well as some business banking and international trade
finance. In 2010, CBA also made a 15 per cent investment in local Vietnamese bank, VIB.
In China, CBA has had representation in Beijing since 1994 and in 2010 opened its first corporate and institutional branch in
Shanghai. The bank has a 20 per cent investment in two Chinese city commercial banks (Qilu Bank and Bank of Hangzhou).
Also, in 2010, CBA entered into a life insurance joint venture partnership called BoCommLife with Chinas fifth largest bank,
Bank of Communications.
CBA has been in Hong Kong since 1986 and in Singapore since 1982. In both markets, CBA focuses on servicing
multinationals from Australia and New Zealand, Asian institutional clients, and offers private banking services for expatriates
and local professionals. The Tokyo branch was established in 1986 and conducts wholesale business activities, CBAs newest
international branch was officially opened in Mumbai, India, in August 2010 and is a fully functional commercial banking
operation.
www.cba.com.au
Macquarie Group
Australian-headquartered Macquarie Group describes itself as a global provider of banking, financial, advisory, investment
and funds management services. The Group has steadily grown its international activities, with a network of more than 70
offices in 28 countries and in recent years has consistently generated more than 50 per cent of its operating income from
international sources. As at 31 March 2010, Macquarie had more than 14,600 staff, with approximately 50 per cent of those
located offshore, and $A326 billion of assets under management.
Macquarie holds a number of leading market positions in the various markets in which it operates. It is a top ten institutional
equities broker based on global stock coverage, and has been a top two ranked manager of Hong Kong initial public offerings
since 2008, and is ranked in the top five North American physical gas marketers. Macquarie has more than one million retail
clients and 200,000 specialist finance and leasing clients worldwide.
Macquarie has grown through a mix of organic growth and selective acquisitions. In 2009-10, Macquarie made several North
American acquisitions, including Constellations downstream natural gas trading business, Fox-Pitt Kelton Cochran, Caronia
Waller, Tristone Capital, Delaware Investments and Blackmont Capital. Macquarie also acquired the cash equities and equity
derivatives operations of Sal. Oppenheim in Europe.
Organic growth initiatives include the global build-out of the institutional cash equities platform, the expansion of debt capital
markets activities into the US and Europe, and the commencement of physical oil trading in Singapore.
www.macquarie.com.au
National Australia Bank (NAB) is a financial services organisation comprising nearly 40,000 people, more than 1800 branches
and service centres, and more than 450,000 shareholders. NAB provides products, advice and services through the major
Australian franchise and businesses in the United Kingdom, New Zealand, the United States and Asia.
NABs international strategy has focused more significantly on the New Zealand, UK and US markets. The banks UK
franchises, Clydesdale Bank and Yorkshire Bank, provide retail, business and corporate banking services to more than 2.7
million customers across the UK. Its US company, Great Western Bank, has more than 900 employees and services 300,000
customers through 125 branches across seven US States, primarily in the mid-west. Great Western Bank focuses on retail
banking, business banking and agribusiness banking.
In New Zealand, NAB has BNZ and BNZ Partners who provide retail, business and agribusiness banking and insurance
services to more than one million customers across New Zealand. BNZ has pioneered a number of innovative concepts
designed to provide customers with a retail, rather than a traditional banking, experience. New concept stores, mobile banking
carts and trailers, and Out of the Box packaged customer solutions have all been introduced.
National Australia Bank in Asia has banking operations in Hong Kong, Singapore and Japan as well as representative offices in
China and India. In China, NAB recently applied for its first branch licence in Shanghai.
www.nab.com.au
> 65
Westpac
Westpacs international operations focus on supporting Australian and New Zealand customers in foreign markets, and
providing a gateway for foreign firms and individuals interested in Australia and New Zealand. Westpac Institutional Bank (WIB)
delivers a broad range of financial services to commercial, corporate, institutional and government customers either based in,
or with interests in, Australia and New Zealand.
Westpacs Asian operations are led out of Singapore, where it offers a full suite of private, corporate and institutional banking
services. Westpac has a branch licence in Hong Kong, Singapore and Shanghai and representative offices in Beijing, Jakarta
and Mumbai. There is an extensive Westpac network throughout the South Pacific with a presence in seven island nations.
The bank has twenty branches in Fiji, 16 in Papua New Guinea and smaller number of branches in the Cook Islands, Samoa,
Tonga, Soloman Islands and Vanuatu.
In Australia, Westpac Retail and Business Banking (WRBB) is responsible for sales, marketing and customer service for around
5 million consumer and SMEs enterprise customers within Australia under the Westpac and RAMS brands.
In December 2008, Westpac merged with St.George Bank Limited adding 2.6 million St.George customers to the group.
St.George bank now operates as an operating division within the wider multi-branded Westpac Group.
www.westpac.com.au
Appendix E Selected Australian Legal and

Accounting/Tax Advisors in Financial Services
Legal
www.aar.com.au
Allens Arthur Robinson
www.allenovery.com
Allen & Overy
www.bakermckenzie.com
Baker & McKenzie
www.blakedawson.com
Blake Dawson
www.claytonutz.com
Clayton Utz
www.corrs.com.au
Corrs Chambers Westgarth
www.dlapiper.com
DLA Piper
www.freehills.com
Freehills
Gadens www.gadens.com.au
www.gtlaw.com.au
Gilbert and Tobin
www.hallandwilcox.com.au
Hall and Wilcox Lawyers
www.hdy.com.au
Henry Davis York
www.holdingredlich.com.au
Holding Redlich
www.hwlebsworth.com.au
HWL Ebsworth
www.maddocks.com.au
Maddocks
www.mallesons.com
Mallesons Stephen Jaques
Middletons www.middletons.com.au
www.minterellison.com
Minter Ellison Lawyers
www.nortonrose.com
Norton Rose
Accounting/Tax
www.bdo.com.au
BDO Kendalls
Deloitte www.deloitte.com.au
www.ey.com
Ernst & Young
www.grantthornton.com.au
Grant Thornton
www.hlb.com.au
HLB Judd Mann
www.horwath.com.au
Horwath
KPMG www.kpmg.com
www.moorestephens.com
Moore Stephens
www.pitcher.com.au
Pitcher Partners
PricewaterhouseCoopers www.pwc.com
PKF www.pkf.com.au
www.whk.com.au
WHK Group
> 67
Appendix F Infrastructure Australias

Reform and Investment Priorities
Development
Category
Project
Area
Project
Estimated
Name
State Cost (A$m)
Early Stage
Transforming our cities Melton Rail Line Duplication

and Electrification (VIC, A$1,300m)
VIC
1,300
Sydneys Future Public

Transport Network (NSW; n/a)
NSW
n/a
Gold Coast City Rail

(SE Qld Mayors; A$2,875m)
QLD
2,875
North-West Sydney to
CBD Rail Link (AIS: A$7,000m)
NSW
7,000
Hobart: A World class,

Livable, Waterfront City
TAS
90
An Innovative Strategy for

Tasmania: Focus on food bowl concept
TAS
105

Competitive International
Gateways
Eyre Peninsula Port Proposals
SA
tbc
Port of Hastings
(incl. Peninsule Link rail freight corridor)
VIC
tbc
Port Hedland Inner Harbour

Capacity Enhancements
WA
3,400
Road and Rail Access and

Port Upgrades at Bunbury
WA
756
Pilbara Cities
WA
2,900

National Freight Network

Australian Digital Train

Control System (ARA)
Mount Isa Townsville Rail

Corridor Upgrade
QLD
788
Bruce Highway Corridor Upgrades
QLD
n/a
Transcontinental Rail Link

Mildura to Menindee
VIC
400
Adaptable and Secure

Water Supplies
20
Total Early Stage Capital Expenditure
19,634
Real Potential
14,000
Transforming our cities
Brisbane Inner City Rail Capacity Upgrade
QLD
Melbourne Metro Stage 2
VIC
tbc

Managed Motorway Proposals

NSW,
VIC SA, WA
Integrating Sydneys Motorway

Network
NSW
n/a
Moreton Bay Rail Link
QLD
1,100
Darra-Springfield Rail and Road project
QLD
2,400
ACT
551
Adaptable and Secure

Water Supplies
Water Security Program
3,200
Tasmanian Water and Sewerage Reform
TAS
1,000
Smart Grid Demonstration Pilot Project
ACT
150
Installation of Low Flow Bypasses

in the Mount Lofty Ranges
SA
47
A True National Energy Market

Development Project
Category
Area
Project Estimated
Name
State Cost (A$m)
Heywood Interconnector Upgrade
SA
80
Mid-West Energy Stage 2
WA
795

Competitive International
Gateways
Abbot Point Multi Purpose Harbour
QLD
Bell Bay Intermodal Expansion Project
TAS
150
Smart Port ICT
VIC
16
Melbourne International Freight Terminal
VIC
260
Gateway WA Perth Airport and Freight Access
WA
600
Road Freight Access to Port

Botany and Kingsford Smith Airport M5 East
NSW
Road Freight Access to Port of

QLD
934
Brisbane and Brisbane Airport Port of Brisbane Motorway Upgrade
Road Freight Access to Port of Melbourne Westlink VIC
5,000
Freight Access to Port of Adelaide

Northern Connector
SA
1,120
East West Rail Freight Corridor (ARTC)
n/a
North South Rail Freight Corridors
NSW
n/a
Eastern Goldfields Railway

Freight Gateway Upgrade (WNR)
Advanced Train Management System (ARTC)
500
Western Interstate Freight Terminal
VIC
Green Triangle Freight Transport Project
SA/VIC
Total Real Potential Capital Expenditure

Threshold
Transforming our cities
2,890
4,000
75
2,314
340
41,522
South West Rail Link
NSW
2,400
Eastern Busway (Stages 2b and 3)
QLD
825
Managed Motorways Proposals SE Qld
QLD
782
Northern Link Road Tunnel
QLD
1,780
WA
4,000
Darwin Port Expansion (potential equity injection) NT
336
Moorebank Intermodal Terminal

Competitive International Oakajee Port (potential equity injection)
Gateways
NSW
Total Threshold Capital Expenditure
tbc
10,123
Ready to Proceed Transforming our cities
Melbourne Metro Stage 1
VIC
4,900
Integrated Transit Corridor

Development Route 86 Demonstration, Project
VIC
28


Adelaide Rail Freight Goodwood

and Torrens Junction
SA
418
Federal Highway Link to Monaro

Highway Majura Parkway
ACT
220
Pacific Highway Corridor Upgrades
NSW
National Broadband Network (NBN)
A National Broadband Network
6,000
Total Threshold Capital Expenditure
11,566
TOTAL ESTIMATED INFRASTRUCTURE PRIORITY PIPELINE CAPITAL COSTS
82,845
Abbreviations: Australasian Railways Association (ARA), Australian Rail Track Corporation (ARTC), West Net Rail (WNR) .
Source: Infrastructure Australia, Getting the fundamentals right for Australias infrastructure priorities, June 2010.
> 69
Appendix G
Capital Expenditure in Australias Mining Sector
International demand for Australian natural resources has grown significantly over the past decade and the local industry has
responded through increased production capacity. Much of this has depended on expanding infrastructure along the supply
chain like railways, ports and pipelines to transport increased mining volumes to market. Large capital projects
in infrastructure and production facilities can be seen in the doubling of annual capital expenditure from A$10 billion to
A$19.9 billion in the five years to October 2010.66
Currently, there are 72 projects with forecast capital expenditure of A$132.9 billion at an advanced stage (projects committed
or under construction) of development the equivalent of 12 per cent of Australian GDP. These projects are spread across
commodities and states, although concentrated by value in petroleum (66 per cent), iron ore (13 per cent) and coal (4 per
cent). Western Australia represents 70 per cent of these projects, followed by Queensland (21 per cent) and New South Wales
(5 per cent).
Committed projects, October 2010
Energy
projects
Mineral
projects
Infrastructure
Projects
Minerals and
Energy Processing
Total

No.
Cost
No.
Cost
No.
State (A$m) (A$m)
Cost
No.
Cost
No.
Cost
(A$m) (A$m) (A$m)
New South Wales
1,715
Victoria
2 2,611
Queensland
6 19,711
5 1,990
3,194
2,050
44
4
1
45
3,343
65
13
6,959
5 2,765
3 2,797
20 27,841
Western Australia
65,447
15
19,237
5,922
2,444
27
93,050
South Australia
138
242
380
Tasmania
1 345 0
0 0
1 150
Northern Territory
Australia
1,444
26 92,890
25 23,563
0
15
11,025
6 5,456
2 495
2
1,444
72 132,934
Sources: ABARE, Minerals and energy Major development projects October 2010
There are currently sixteen projects committed or under construction that exceed A$1 billion in capital cost, with six projects
costing in-excess of A$5 billion.
66. ABARE-BRS, Minerals and energy major development projects report, October 2010.
Capital Expenditure committed or under construction by inidvidual projects over A$5 billion

Project Company 1
Location
Gorgon LNG
Expected Capital
Startup Expenditure2 Sectors
Chevron / Shell / ExxonMobil Barrow Island, WA
2015
Queensland Curtis LNG project BG Group

Gladstone, Qld
2014

Pluto (train 1)
Woodside Energy

Carnarvon Basin/
Burrup Peninsula, WA
2011

Rapid Growth Project 5 (RGP5) BHP Billiton

Pilbara, WA
2011

$43b
Petroleum
US$15b (A$16.7b)
(BG Groups Share)
Petroleum
$12.1b
(inc site works for train 2)
Petroleum
US$5.65b (A$6.3b)
incl. infrastructure)
Iron Ore
NWS North Rankin B

Woodside Energy/
150 km NW of Dampier
BHP Billiton/BP/Chevron/
Carnarvon Basin, WA
Shell/Japan Australia LNG
2013
$5.1b (A$5.7b)
Petroleum
Sino Iron Project
CITIC Pacific Mining
2011
US$5.2b (A$5.8b)
Iron Ore
Cape Preston, WA
1. Principal operating companies.

2. Total capital expenditure as reported by the company in current dollars. Includes cost of development, plant and equipment.
Sources: ABARE-BRS, Minerals and energy major development projects, October 2010
Further, there are A$248.0 billion of less advanced projects (undergoing feasibility or pre-feasibility). The fifteen largest of these
are estimated to cost in-excess of A$2 billion. The largest four projects are in the energy sector.
Infrastructure projects directly associated with the Minerals and Energy sector currently stand at 15 with an estimated cost
of A$11.0 billion in committed projects, and a further 31 valued at A$27.8 billion in less advanced projects. Committed
infrastructure projects include iron ore and coal ports, rail projects and gas pipelines. The largest committed projects include
the Cape Lambert A$3.4 billion port expansion in Karratha, W.A. and the A$1.1 billion Connyella to Abbot Point rail expansion
in Queensland. The largest of the less advanced infrastructure projects include the A$4.3 billion Oakajee Port Rail and the
A$2.1 billion Port Hedland projects.
Further information can be found at ABARE-BRS, Minerals and energy major development projects report October 2010
http://adl.brs.gov.au/data/warehouse/pe_abarebrs99001758/MEP_Oct2010_report.pdf
> 71
Appendix H Transaction Services

Payments System
Australias payments system represents a unique model of combined government and industry self-regulation.
Regulation
The Payments System Board (PSB) of the Reserve Bank of Australia oversees the payments system and is responsible for
promoting the safety and efficiency of the payments system. Through the Payment Systems (Regulation) Act 1998 and the
Payment Systems and Netting Act 1998, the Reserve Bank has a clear mandate to oversee the operation of the payments system.
The Australian Payments Clearing Association (APCA) is the Australian payments industrys principal self-regulatory body.
It is the primary vehicle for payments industry collaboration with a mandate to manage and develop regulations, procedures,
policies, and standards governing payments clearing and settlement within Australia.
Payments System Access Points

The sophistication and competitive nature of Australias payments system is reflected in the changing nature of access points
to the system. Access to the payments system comes from bank and non-bank (credit union and building society) branches,
Bank@Post,67 ATMs and EFTPOS terminals.
As at June 2010, banks operated out of 5,544 branches while non-bank branches numbered 1,167.68 While bank branches
have been steadily increasing since 2001, non-bank branches have shown a slow decline over the past few years.
ATM and EFTPOS terminal numbers grew significantly over the decade to June 2010, with ATM numbers tripling to 28,764 and
EFTPOS terminals more than doubling to 712,434.69
Cash Payments
Cash remains the most important payment instrument for small retail transactions and accounts for the highest volume of
transactions. Automated Teller Machines (ATMs) have facilitated the use of cash by making it more readily available. In 2009,
monthly withdraws from ATMs averaged A$12.6 billion,70 or approximately A$575 per person.
Non-cash Payments
Non-cash payments account for most of the value of payments in the Australian economy. It is estimated that approximately
A$22071 billion of non-cash payments are made each business day, equivalent to 20 per cent of GDP.
Approximately three-quarters of the value of non-cash transactions are high-value business transactions, which are processed
through Australias real-time gross settlement (RTGS) system.
The use of debit cards has also grown significantly in recent years. As at 31 August 2010, there were 32.1 million bank
accounts that could be accessed by a debit card, and these cards processed some 197 million transactions (purchases and
cash-outs) during the month with a total value of A$13 billion.72
Australia was ranked one of the Top Ten in the world in the Economic Intelligence Units Digital Economy Rankings 2010. Australia
is a very sophisticated market where ICT companies can successfully develop solutions with global applicability. The country is also
the source of a number of distinctive technologies especially in the areas of e-finance, e-health, and e-government.
67. Bank@Post (formerly giroPost) provides a limited range of financial services at certain Australia Post offices on behalf of member financial institutions. In June 2010,
member institutions comprised Adelaide Bank, Bank of Queensland, BankWest, Bendigo Bank, Citibank, Commonwealth Bank, HSBC Bank Australia, ING Direct, Members
Equity, National Australia Bank, St. George Bank, B&E Ltd, GE Capital Finance Australia, Heritage Building Society, IMB Ltd, Maitland Mutual Building Society, RAMS Home
Loans, Wide Bay Australia Ltd and 56 credit unions. http://www.rba.gov.au/statistics/tables/xls/c08hist.xls
68. RBA website, http://www.rba.gov.au/statistics/tables/xls/c08hist.xls
69. RBA website http://www.rba.gov.au/statistics/tables/xls/c08hist.xls
72. RBA website, http://www.rba.gov.au/statistics/tables/xls/c05hist.xls
Payment Settlements
Arrangements for clearing most payment instruments cheques, direct entry payments, ATMs, EFTPOS and high-value
payments are coordinated by the Australian Payments Clearing Association (APCA), which is a private company owned
by banks, building societies and credit unions. Scheme credit and debit cards (MasterCard and Visa) and BPAY are cleared
independent of APCA. APCA administers five payments clearing systems covering cheques, direct debit and direct credit
payments, EFTPOS and ATMs, high value and bulk cash, and the COIN Infrastructure System.
Final settlement of obligations between payments providers is undertaken by entries to the providers Exchange Settlement
(ES) accounts at the Reserve Bank. Large-value payments are settled one-by-one on a real-time gross settlement (RTGS)
basis, while retail payments are settled as a batch on a deferred net settlement basis.
BPAY
Launched in 1997, BPAY was a world first single bill payment system that was adopted across the banking sector. Its
objectives were to provide a convenient and secure way for consumers to pay bills and a more efficient collection service
for billers and financial institutions. More than 170 Australian financial institutions (Authorised Deposit-taking institutions
under the Banking Act), covering approximately 90 per cent of the consumer banking market, belong to the scheme.
There are more than 18,000 biller codes that accept BPAY and each month 25.7 million bills worth A$19.2 billion are paid
using BPAY. More information on BPAY is available at www.bpay.com.au.
Future Trends
In December 2008, APCA released its vision for the evolution of Australias electronic payments systems, entitled Low Value
Payments: An Australian Roadmap. The report was based on extensive consultations with industry and lays out a high level
vision for low value payments in Australia for 2018. The roadmap focuses on cheque and direct entry systems and sets out a
series of industry initiatives, including new connectivity of applications to international standards and standard messaging.73
In May 2010, the Payments System Board announced a strategic review of innovation in the Australian payments system. The
objective is to identify areas in which innovation in the Australian payments system could be improved through more effective
co-operation between stakeholders and regulators. The Board anticipates finalising its conclusions by the end of 2011.
New Technologies
Mobile Banking/Payments
Mobile payments (which include SMS-based stored value services, top ups of mobile accounts and phone bill charges) are
at an early stage of adoption in Australia. Most mobile payments are for phone-related products (such as ringtones) or are
internet banking payments initiated on a smartphone.
Stored Value Cards
Stored value cards (also known as rechargeable stored value, smart cards or electronic purses) are cards which store
rechargeable value. Such cards come with various characteristics and degrees of sophistication and are being used in
Australia primarily in the form of gift cards, telephone cards, and public transport. Take-up of these cards and other SMART
card type applications in Australia has been less than in other countries such as the United States.
A recent entrant to the Electronic Funds Transfer at Point of Sales (EFTPOS) system is Tyro. Tyro provides an internet based
EFTPOS solution for credit, debit and gift card transactions on behalf of Australian merchants.
Touch and Go
Touch and Go technology (MasterCard Paypass and Visa Paywave) has recently appeared in the Australian market; it allows
for the rapid payment of goods and services by simply touching the card against the terminal. A special chip in the debit card
is detected by the terminal. It is limited to transactions with a value below $100. While the lack of verification has created
concerns about security, the Commonwealth Bank has reported that 25 per cent of eligible transactions at its 15,000 terminals
are now processed using this technology.
73. APCA, Low Value Payments: An Australian Roadmap, December 2008.

> 73

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Australias Banking Industry

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Australias

Date: May 2011

Australias Banking Industry

Summary of available operating models

Australian Credit Licence

Summary of requirements for each option

Non-Deposit-Taking Finance Companies

The authorisation and application processes

Australian financial services licences

Size and Scope

What is a financial service?

What is a financial product?

Retail and wholesale clients

Retirement or Superannuation savings

Anti-money laundering and similar laws

Self-Managed Superannuation Funds

New laws to change the way to take security

Government Reforms Competitive

Taxation of business profits

Taxation treatment of funding options

Commercial Banking and Corporate Finance

Authorised Deposit-taking Institutions

When is interest withholding tax payable?

Boutique Advisory Firms and Securities Brokers

Exemptions from IWT

Specialised Finance Companies

Phasing down Australian IWT for financial institutions

Special treatment for offshore banking units

Project and Infrastructure Finance

Corporate Finance and Advisory

Mergers and Acquisitions

Equity Capital Markets

Debt Capital Markets

Over-the-counter and exchange-traded markets

Appendix A Banking Institutions

Appendix B Credit Unions and Building Societies

Appendix C Foreign Retail Banks in Australia

Appendix D International Expansion of

Appendix E Selected Australian Legal and

Appendix F Infrastructure Australias Reform and

Transaction Services Payments System

Regulation and Tax Environment

Regulation of the financial system

Appendix G Capital Expenditure in Australias

Australian Prudential Regulation Authority

Appendix H Transaction Services Payments System

Australian Securities and Investments Commission

Reserve Bank of Australia

Payments System Access Points

Australian Competition and Consumer Commission

Australias Banking Industry

Australia ranked fifth amongst the worlds

Competition in this sector includes the major and regional

A$620 billion commercial lending market.

US$336 billion over the five years to 2010, equivalent to

The second largest project finance market in Asia-Pacific

The second largest free-floating stock market in the

Asia-Pacific region, and sixth largest globally, with a

One of the three largest Mergers and Acquisitions markets

The second largest Equity Capital Market in Asia-Pacific

A securitisation market that has resumed growth following

A fast growing Kangaroo bond market that has increased

The worlds seventh largest foreign exchange market

with total FX turnover averaging US$192 billion per day in

New laws to change the way to take security

Government Reforms Competitive

6 > Australian Trade Commission

8 > Australian Trade Commission

10 > Australian Trade Commission