Australia's and Hong Kong's Financial Systems - Essay Example

Financial products and services in both countries are classified into personal and business categories (Viney and Phillips, 2012). Under both the personal and business categories, banks in both Australia and Hong Kong offer depository and custodial services, whereby they accept deposits from customers and even grant them safe custody keeping for their valuable items. Secondly, the banks in these two countries also specialize in providing financial advice to individual and business customers on matters to do with banking, other investments, as well as insurance. Thirdly, these banks offer insurance services to their customers but it is important to note that most banks in Hong Kong have a subsidiary that specializes in offering insurance services. Fourthly, these banks also offer the services of mobile banking, which enable customers to do transactions from their mobile phones.

The common products offered by banks in both countries to individuals and businesses are the provision of lending or credit facilities to the customers. The other key common products offered by the banks in both countries are credit and debit cards that allow business as well as individual customers to make payments without using liquid cash. Other products are checkbooks and travelers’ cheques.

The relative importance of banks versus stock exchange as the source of the industrial financing
According to Siciliano (2003), banks, as well as the stock exchange, provide a source for industrial financing. In particular, banks issue industrial financing in the form of loans or overdrafts while the stock exchange provides for industrial financing through the selling of a company’s shares, which in turn earns the company additional capital for investments.

The financial sector, which encompasses the banking sector and the stock exchange in both Australia and Hong Kong is vibrant but Kelley et al (2008) noted that Hong Kong’s banking sector could be considered more vibrant because Hong Kong is renowned as an international banking center. Moreover, it plays host to numerous financial international financial institutions such as the Hong Kong and Shanghai Banking Corporation. Additionally, Hong Kong has more than 156 licensed banks, 21 restricted banks, and 24 deposit-taking companies, and 61 representative offices of overseas banking institutions while Australia has only 56 banks, 103 credit unions, and 10 building societies (Australia Prudential Authority, 2011). This, therefore, means that the banks play a key role in the financial sector of Hong Kong and there is the relative importance of banks as the main source of industrial financing in the region as compared to Australia.

Moreover, Genberg and Hui (2008) stated that Hong Kong has three different tiers of banking institutions that include licensed banks, restricted license banks, and deposit-taking companies, which means there is a wide variety of financing options from banks in Hong Kong that perhaps suit the needs of each kind of business within the region.
Australia on its part is noted to have a very vibrant stock exchange sector as compared to Hong Kong. First, this is because of the simple reason that Australia has other secondary securities exchanges besides the primary Australian Securities Exchange, which was created from the merger of Sydney Futures Exchange and Australian Stock Exchange whereas Hong Kong has only one primary securities exchange, which is the Hong Kong Stock Exchange (Cejnar, 2012).

Secondly, the Australian Securities Exchange has a listing of 2,122 with a market capitalization of $1.4 trillion (Australian dollar) while the Hong Kong Stock Exchange has only a listing of 1,421 companies which equals a market capitalization of 16.985 trillion (Hong Kong dollar). Moreover, the Australian dollar is ranked as the 5th most traded currency in the World while the Hong Kong dollar is ranked at the thirteenth position.

The vibrant stock exchange sector in Australia, which is characterized by high listing, affirms the fact that the Stock exchange is the leading source of industrial financing in the country. Read More