Tài chính doanh nghiệp - Chapter 3: Non - Bank financial institutions (nbfis)

Chapter 3Non-bank FinancialInstitutions (NBFIs)Websites:  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonLearning ObjectivesUnderstand the role of NBFIs in the financial systemOutline the financial products and services provided by NBFIsDescribe NBFI’s principal sources and uses of fundsExamine the regulatory systemCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation3.1 Introduction3.2 Investment and Merchant Banks3.3 Life Insurance Offices3.4 General Insurance Offices3.5 Superannuation Funds3.6 Finance Companies and General FinanciersCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation (cont.)3.7 Permanent Building Societies3.8 Credit Cooperatives3.9 Managed Funds3.10 Export Finance and Insurance Corporation3.11 SummaryCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.1 IntroductionNBFIs can be differentiated by their source and use of funds, OBS business and regulationCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation3.1 Introduction3.2 Investment and Merchant Banks3.3 Life Insurance Offices3.4 General Insurance Offices3.5 Superannuation Funds3.6 Finance Companies and General FinanciersCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.2 Investment and Merchant BanksEvolved under regulationOfficially classified as ‘money market corporations’ (not authorised banks)Size of balance sheet not constrained by capital adequacy requirementsPrimarily deal in wholesale financeCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.2 Investment and Merchant Banks (cont.)Sources of fundsMainly offshore money market securitiesUses of fundsPrimarily short-term loans to corporations and governmentLittle direct involvement in household sector except through cash management and unit trust productsCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.2 Investment and Merchant Banks (cont.)Other activitiesDeregulation has allowed banks to move into merchant bank activitiesThis led money market corporations to develop their OBS businessProvide advice, management services and funding arrangements forMergers and acquisitionsTakeover company seeks to gain control over a target companyCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.2 Investment and Merchant Banks (cont.)Other activities (cont.)Project finance and structured financeLending for large projects where loan repayments are based on projected cash flowsSecuritisationThe conversion of non-liquid assets into new assets-backed securities that are serviced with cash flows from the original assetsCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation3.1 Introduction3.2 Investment and Merchant Banks3.3 Life Insurance Offices3.4 General Insurance Offices3.5 Superannuation Funds3.6 Finance Companies and General FinanciersCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.3 Life Insurance Offices (cont.)Sources of funds (cont.)Examples of policiesWhole-of-lifeEndowmentTerm-lifeTotal and permanent disablement insuranceTrauma insuranceIncome protection insuranceBusiness overheads insuranceCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.3 Life Insurance Offices (cont.)Uses of funds$200 billion managed by life offices as at December 200150% held in equities and unit trusts14% invested in long-term securities15% invested overseasRegulationSupervised by APRA which applies the same capital and liquidity management requirements as that of banksCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation3.1 Introduction3.2 Investment and Merchant Banks3.3 Life Insurance Offices3.4 General Insurance Offices3.5 Superannuation Funds3.6 Finance Companies and General FinanciersCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.4 General Insurance OfficesCompany pays the insured a pre-determined amount on the occurrence of some pre-specified eventSources of fundsPremiums paid in advance (contractual)Funds source not as stable as for life officesExamples of policies House and content, motor vehicleCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.4 General Insurance OfficesCompany pays the insured a pre-determined amount on the occurrence of some pre-specified eventSources of fundsPremiums paid in advance (contractual)Funds source not as stable as for life officesExamples of policies House and content, motor vehicleCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.4 General Insurance Offices (cont.)Uses of fundsGenerally shorter term, highly marketable securities, due to the less predictable nature of the risks underwrittenExamplesMoney market securities like bills of exchange, commercial paper, certificates of deposit and Treasury notesPrudential supervision by APRACopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation3.1 Introduction3.2 Investment and Merchant Banks3.3 Life Insurance Offices3.4 General Insurance Offices3.5 Superannuation Funds3.6 Finance Companies and General FinanciersCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.5 Superannuation FundsSavings accumulated to fund an individual’s retirementA range of providers manage superannuation fundsLife insurance officesSpecialist superannuation fundsPrivate businessesPublic corporationsGovernmentsCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.5 Superannuation Funds (cont.)Total superannuation assets exceed $520 billionSources of fundsFrom member’s contribution into eitherEmployee-sponsored fundsSuperannuation fund established by an employer for the benefit of employeesPrivate (or personal) superannuation fundsSuperannuation savings plan or single-premium schemeCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.5 Superannuation Funds (cont.)Sources of funds (cont.)Compulsory superannuation fundsSuperannuation Guarantee Charge (SGC)Phased in between 1992 (3−4%) and 2002 (9%) whereby employers provide a required level of superannuation for their employees into a complying superannuation schemeUses of fundsHighly diverse investmentsLarge proportion in equities and unit trustsApproximately 20% invested overseasCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.5 Superannuation Funds (cont.)Types of superannuation fundsCapital guaranteedValue of initial investment guaranteedCapital stableInitial investment is secured, but not explicitly guaranteedBalanced growthTargets a longer term income stream supported by capital growthCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.5 Superannuation Funds (cont.)Types of superannuation funds (cont.)Managed growth or capital growthSeeks greater return through capital growth and less through income streamRegulationLegislation directly impacting on the operation of superannuation fundsSuperannuation Industry (Supervision) Act 1993 (Cwlth) (SIS)Income tax Assessment Act 1936Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.5 Superannuation Funds (cont.)APRA: responsible for prudential supervisionASIC: responsible for market integrity and consumer protection of productsConcessional tax treatment of complying superannuation funds15% tax rate applied to fund contributions and earningsReasonable Benefit limit (RBL) is the amount of concessionally taxed superannuation funds allowable, based on lump sum and pension limitsCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation3.1 Introduction3.2 Investment and Merchant Banks3.3 Life Insurance Offices3.4 General Insurance Offices3.5 Superannuation Funds3.6 Finance Companies and General FinanciersCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.6 Finance Companies and General FinanciersIndustry structureEmerged largely due to previously highly regulated banking sector to circumvent restrictions on interest rates and lendingSector share of total assets has declined since deregulation from 13% in 1980 to less than 4% in 2002Sector dominated by bank-owned companies (e.g. AGC, Esanda, CBFC)Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.6 Finance Companies and General Financiers (cont.)Industry structure (cont.)Manufacturer-affiliated examples include Ford Credit, RACV FinanceSources of fundsMost of the funds obtained fromBorrowings from related corporationsLoans from banksIssue of debentures and unsecured notesBorrowings from overseasCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.6 Finance Companies and General Financiers (cont.)Uses of fundsLease financingLoans to businesses (e.g. bills finance, term loans, floor plan financing, factoring and accounts receivable financing)RegulationFinancial Corporations Act 1974 (Cwlth)Corporations Law 1989 (Cwlth)Consultation and reporting to APRACopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation (cont.)3.7 Permanent Building Societies3.8 Credit Cooperatives3.9 Managed Funds3.10 Export Finance and Insurance Corporation3.11 SummaryCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.7 Permanent Building Societies (PBS)Industry structureDuring regulation PBS gained market share at the expense of savings banksHave had difficulty competing since deregulation of the financial sectorMany PBS have merged and some have become banks (e.g. Adelaide Bank)Sector share of total assets only 0.6%Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.7 Permanent Building Societies (PBS) (cont.)Sources of fundsMainly deposits from household sector Uses of fundsMainly owner-occupier housing financeCommercial loansRegulationAs authorised deposit-taking institutions (ADIs) regulation is the same as banksCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation (cont.)3.7 Permanent Building Societies3.8 Credit Cooperatives3.9 Managed Funds3.10 Export Finance and Insurance Corporation3.11 SummaryCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.8 Credit CooperativesAlso known as credit unionsCommon bond of association often exists between members due to employment, industry or community (e.g. Shell Employees’ Credit Union)Sources of fundsMainly deposits from members (payroll deductions)Also issuance of promissory notesCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.8 Credit Cooperatives (cont.)Uses of funds (Jan 2002)Primarily personal finance to membersResidential housing loans (52%)Personal loans and credit card facilities (24%)Liquid assets including cash, bank deposits and govt. securities (20%)Sector share of total assets 1.25%Regulation – as an ADI, same as banksCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation (cont.)3.7 Permanent Building Societies3.8 Credit Cooperatives3.9 Managed Funds3.10 Export Finance and Insurance Corporation3.11 SummaryCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.9 Managed FundsProvide direct access to wholesale investment markets for pooled savings of individuals (not an intermediary)Investors in the fund obtain a right to the assets of the fund and a share of the income and capital gains (losses) derived from those assetsManaged Investments Act 1998 (Cwlth) requiresResponsible entity (trustee and manager)Trust deedCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.9 Managed Funds (cont.)Sector share of total assets 40%Types of managed fundsStatutory funds of life officesSuperannuation and approved deposit fundsCash management trustsCommon fundsPublic unit trustsFriendly societiesCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.9 Managed Funds (cont.)Cash management trustsInvestment funds established under a trust deed, which specifies the trust’s investmentsGenerally invest in short-term money market instrumentsProvide high liquidity for the investor (one-day’s notice)Give small investors access to wholesale investment marketsCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.9 Managed Funds (cont.)Public unit trustsInvestors purchase a share in the trust in the form of a ‘unit’The trustee pools the funds received from investors and invests themUnit holders receive a return in the form of capital gain or incomeCan be eitherListed Trusts: units quoted and sold on the ASX (highly liquid) – 34%Unlisted Trusts: units bought and sold by trustee (less liquid) – 66%Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.9 Managed Funds (cont.)Public unit trusts (cont.)Types of unit trusts includeProperty trusts (31%)Equity trusts (47%)Mortgage trusts (4%)Fixed interest trusts (18% approx.)Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation (cont.)3.7 Permanent Building Societies3.8 Credit Cooperatives3.9 Managed Funds3.10 Export Finance and Insurance Corporation3.11 SummaryCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.10 Export Finance and Insurance Corporation (EFIC)EFIC is the official export credit agencyIt encourages export trade through the provision of trade insurance, and financial services and productsCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.10 Export Finance and Insurance Corporation (EFIC) (cont.)Examples includeRisk of non-paymentExposure to political riskGuarantee of trade financeCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye WatsonChapter Organisation (cont.)3.7 Permanent Building Societies3.8 Credit Cooperatives3.9 Managed Funds3.10 Export Finance and Insurance Corporation3.11 SummaryCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.11 SummaryNBFIs can be classified according to their assets and liabilities, and the type of services providedMoney market corporations provide advisory services to corporations and governmentLife insurance and general insurance offices are contractual savings institutions which generate funds mainly on the receipt of premiums for insurance policiesCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson3.11 Summary (cont.)Superannuation funds facilitate saving by individuals for their retirementFinance companies issue debentures and unsecured notes and lend to businessPBS and credit unions receive deposits from individuals and lend for residential housingManaged funds provide access to wholesale investment markets for pooled savingsEFIC provides insurance and financial services and products for exportersCopyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Financial Accounting by WillisSlides prepared by Kaye Watson