Reference no: EM132944540
a) Identify the key responsibilities of each regulator by filling in the "Responsibilities" column below with the number associated with the selected/ that responsibility.
1. Managing the Monetary Policy in Australia
2. Regulating the capital level of the authorised deposit institutions (ADIs) in Australia
3. Overseeing the payment system in Australia
4. Enforcing company and financial services laws to protect consumers, investors and creditors
5. Regulating bank's liquidity level
6. Issuing licences to ADIs
7. Monitoring the conduct of Australian companies and services providers
8. Issuing Australian financial services licences to financial services businesses
Regulator
Responsibilities
The Reserve Bank of Australia
The Australian Prudential Regulation Authority
The Australian Securities and Investment Commission
b) Monetary Policy (MP) is one of the key pillars of macroeconomic policy. Australia is going through its first recession in decades due to the Covid-19 pandemic. Briefly explain how the monetary authority could use the MP to affect the economy? (Include in your answer the definition of MP, inflation target of the MP, the expected effect of any suggested change in cash rate on consumption, investment and the likely change to net export).
c) Australian banks are closely regulated due to their significant impact on economic activities. One of the major regulations imposed on the banks is the capital adequacy requirement for the credit risk that banks potentially have to face.
i) What is credit risk?
ii) Briefly explain how banks are regulated in terms of their capital adequacy and how this requirement helps to control the credit risk of banks.
d) Managed Investment Funds (MIFs) are an important investment alternative for Australian savers. What are MIFs?
e) Superannuation funds are one important class of MIFs, briefly describe the key characteristics of these funds.