Financial Institutions

Retail banks such as the Commonwealth, NAB, ANZ and Westpac take deposits from account holders, borrow money from international money markets, and then lend money to individuals and businesses.

The most important source of funds for SMEs and growing businesses (mortgages, credit cards, overdrafts). Interest rates can change, impacting cost of finance to borrowers.

Merchant banks such as the Macquarie Bank, Citibank and Deutsche Bank provide financial services to the business sector (large public firms). 

These banks provide debt sourcing services for large syndicate loans, create debentures (bonds), advise on mergers / acquisitions, undertake IPOs for growing firms, provide services in currency exchange and hedging risk management.

Finance companies act as higher-risk bankers; they do not accept deposits but they borrow money at low rates (from overseas) and lend it out at higher rates of interest. This interest rate margin generates profits.

These firms charge comparatively higher rates of interest to borrowers. Finance companies are major providers of lease finance; firms organise finance companies to make specific asset purchases in order to lease it long-term. Used in Sale and Leaseback strategy.

Australian workers have forced investment accounts that earn returns over decades to fund retirement activities. The industry manages over $2 trillion of funds.

These super funds invest in the debt of businesses (debenture / bonds) and in shares (equity) of public firms to gain returns for their members. This massive pool of funds has little direct contact with firms, but supports the debt and equity issues of thousands of firms in Australia. 

An institution (also a publicly listed company) that functions as share market operator, clearing house for trades in shares, and derivatives market facilitator. It is through the ASX that firms acquire external equity.

Primary market: new capital raisings through IPOs; secondary market: sale and purchase of pre-owned shares. ASX also promotes high standards of corporate governance. Only impacts large public firms.

Company providing risk protection to individuals in case of death or serious injury. Premiums are received by the insurance firm (hoping that fewer claims are made) creating a large pool of funds for investment. 

These companies investment large amounts of money into equity and debt markets (debentures and shares of large businesses), but have little direct contact with underlying firm.

A unit trust is an investment vehicle through which thousands of individual members can contribute funds to purchase assets to gain a return. The pool of funds is invested by an trust manager in either shares (Australian or international), residential or commercial property, debentures, or the mortgage market.

Little direct contact with businesses seeking finance; but their investment decisions impact financial markets.