Overview of the banking and financial services system

This is a segment of Lander & Rogers’ Guide to Doing Business in Australia.

Industry structure

The financial services industry in Australia is made up of a number of different streams including financial advisers, banks, building societies, credit unions, mutuals, insurance, collective investments, finance companies, non-bank credit providers and superannuation funds. The central bank is the Reserve Bank of Australia.

Australia has a uniform licensing regime that applies to all persons and entities carrying on a financial services business in Australia (regardless of physical location) unless entitled to rely on an exemption. Additional regulations apply to the provision of consumer credit in Australia.

The financial services industry is highly regulated and, as a result, provides a sophisticated and competitive system for those wanting to do business in Australia.

Regulators

The two key regulators in the industry are the Australian Prudential Regulation Authority (APRA) and the Australian Securities & Investments Commission (ASIC). Both regulators recover their operating costs by charging levies on the entities that they regulate.

APRA is responsible for supervising the risk management and financial stability of Australia’s banks, insurance companies and most superannuation funds. APRA sets capital adequacy requirements and has established several prudential standards for compliance in each part of the industry.

ASIC regulates all Australian companies, financial markets, and financial services organisations and professionals who advise on financial products or deal in financial products or services in Australia. Regular reports are required to be lodged with ASIC regarding a company’s activities.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the regulator for Australia’s anti-money laundering and counter-terrorism financing laws and is also a financial intelligence agency.

The Office of the Australian Information Commissioner (OAIC) is the regulator of Australia’s privacy laws and is responsible for administering the mandatory credit reporting code that binds credit providers and credit reporting bodies.

Licensing

All banks carrying out banking business in Australia must hold a banking licence issued by APRA (with certain limited exceptions). Insurance companies and superannuation funds carrying on business in Australia are also required to be registered and licensed with APRA. Persons and entities carrying on a financial services business in Australia must either hold an Australian Financial Services Licence (AFSL), be authorised by an AFSL holder to act as their representative, or be entitled to rely on an exemption from licensing. AFSLs are issued by ASIC. ASIC must be satisfied that the entity is competent to carry on the financial services business and has sufficient financial and other resources to do so.

If an entity is engaging in consumer credit activities, it will also require an Australian Credit Licence (ACL) issued by ASIC unless an exemption applies.

Anti-money laundering and counter-terrorism financing

Australia’s anti-money laundering and counter-terrorism financing laws cover various functions of financial services entities and other entities, regardless of whether they hold an AFSL or ACL. There are protective measures in place, such as identification processes for opening bank accounts to prevent tax evasion and money laundering.

Entities that provide a ‘designated service’ described in the legislation must implement, and regularly review, an anti-money laundering program.

There are also certain reporting obligations for some transactions that require financial institutions, financial corporations, insurance companies and intermediaries, securities dealers, futures brokers, and gaming institutions to report events such as:

• suspicious transactions;
• significant cash transactions (of A$10,000 or more,
• or the foreign currency equivalent); and
• international telegraphic or electronic transfers of funds and instructions transmitted or received on behalf of their customers.

Entities are also required to undertake regular training for their employees in this area.

Banks

There are four major Australian banks (Commonwealth Bank, Westpac, Australia and New Zealand Banking Group and National Australia Bank), numerous smaller/ regional banks, and multiple offshore banks also operate in the Australian market. These institutions comprise of retail banks, commercial banks and investment banks. Mortgage-backed loans issued to home buyers, and business loans and consumer credit make up the majority of products offered by the Australian banks.

The Reserve Bank of Australia (RBA) is responsible for formulating and implementing Australia’s monetary policy. The RBA sets the target cash rate, which is the interest rate that banks pay or charge to borrow funds from other banks on unsecured overnight loans. The RBA is responsible for the stability of Australia’s financial system and accountable to the Australian Federal Parliament. Its board meets on the first Tuesday of each month, eight times a year.

Similar to other central banks worldwide, in an effort to slow rapidly rising inflation in Australia, the RBA increased the cash rate almost monthly in 2023. As inflation eased, the RBA dropped the cash rate from 4.35% on 8 November 2023 to 3.60% effective 13 August 2025. As inflationary pressures increased in late 2025 and early 2026, the RBA increased the official cash rate to 4.10% (as of 18 March 2026). Current RBA cash rates can be found on the RBA website.

Secured financing

a) Land

Land in Australia may be subject to a legal or equitable mortgage or charge. A party holding a secured mortgage or charge over property is typically granted a power of sale among other things, which becomes actionable on the event of default under the relevant loan or security documents. However, enforcement is subject to the rights and obligations set out in legislation and the relevant transaction documents. Australia is transitioning to electronic registration of mortgages. Across the states and territories, mortgage dealings are commonly registered through the platform PEXA. However, paper lodgement may still be required in certain circumstances.

Note that a foreign person not in the ordinary business of money lending may require FIRB approval to take a mortgage over land in Australia.

b) Personal Property

The Personal Property Securities Act 2009 (Cth) (PPSA) established a uniform legislative framework for security interests over personal property in Australia. Personal property refers to property other than land and includes, among other things, intellectual property, goods, equipment, shares, units and debts securities. This national standardised system enhances transparency and reduces disputes. Security interests that have arisen under a security document (such as a general security or specific security agreement) that are recorded and registered on the Personal Property Securities Register (PPSR) established by the PPSA take priority over unsecured creditors in the event of insolvency or bankruptcy. Subject to certain exemptions, the order of registration determines the priority of competing interests

Managed funds

The managed funds industry in Australia is made up of large institutional managers as well as boutique investment managers who charge a range of management fees. Funds are generally established as unit trusts, on a single asset (such as cash, fixed interest, property, share or alternative investment funds) or mixed asset/multi-sector basis (generally categorised by risk).

Most managed funds are unlisted, however, some are listed on an exchange, such as the Australian Stock Exchange. There has been a significant increase in credit funds operating in Australia in recent years, as non-bank lending is not currently subject to the same degree of regulation as bank lending.

Life insurance

Life insurance policies require an insurer to pay a benefit to an individual upon their death, disablement, terminal medical condition diagnosis, or other injury. These products are often complex and may have exclusions unique to each product. Superannuation funds are also able to offer life insurance products to their members through a group insurance policy purchased by the superannuation fund from a life insurer.

The Life Insurance Code of Practice requires life insurers and friendly societies that offer life insurance, and which are members of the Council of Australian Life Insurers, to meet prescribed standards of service to customers.

General insurance

This sector of the industry provides underwritten insurance policies to individuals and businesses to protect against specific losses and other risks. Types of insurance offered include building and contents insurance, contract works insurance, motor vehicle insurance, product liability insurance, travel insurance, employer’s liability insurance, and professional indemnity insurance.

The General Insurance Code of Practice requires general insurers to meet customer service standards if the insurer is a member of the Insurance Council of Australia and offer certain types of insurance to individuals and small businesses.

Superannuation

Australia’s pension funds, known as superannuation funds, are one of the largest asset holders in Australia, currently holding around A$4.5 trillion in assets.

Superannuation funds operate as trusts and can be governed in various ways (a self-managed superannuation fund is managed by individual trustees, for example, while the trustee of a public sector fund is managed by government agencies).

In Australia, an employer must pay (through the private superannuation system) a minimum level of superannuation support for each of its employees, currently 12% of ordinary time earnings, capped at a maximum income of $62,500 per quarter for FY25/26, meaning a maximum contribution of $7,500 per quarter.

Most recently, established funds are accumulation-style funds (sometimes called defined contribution funds), meaning that contributions (made by the employer and often also by the member) accumulate over time in each member’s account. Superannuation funds also offer insurance to members. The benefit that is paid to the employee upon a triggering event is simply the balance in the employee’s account and, where applicable, an insured component. Examples of triggering events are death, disablement, terminal medical condition, or retirement.

However, some older funds provide “defined benefits”. As the name indicates, this means that the benefit paid to the member is defined by a formula. Therefore, employers do not contribute a set rate as in an accumulation fund, but rather contribute in accordance with an actuary’s recommendation, designed to ensure that the fund is adequately funded in order to pay out the promised benefits when they are due.

Benefits that accumulate or accrue in the superannuation system are generally “preserved” until the member reaches at least age 56 (or older, depending on the member’s date of birth) so that superannuation benefits cannot be accessed by a member before this age except in limited circumstances.

Read our comprehensive guide to doing business in Australia in our downloadable Guide to Doing Business in Australia (PDF).