I. Introduction:
The confidence of banks is very important for the stability of financial system as a whole. However, similar to the situation of banks in other countries around the world, the influence of the global financial crisis (GFC) have increased difficulties in raising funds for banks in Australia. Such difficulties have forced Australian Banks to seek for a more stable source for their funding. This has then led to a change in structure of banks’ funding in Australia. This report will identify major components of banks’ funding with a concentrating on the change of banks’ funding composition. The report also include some predictions for the banks’ funding structure in the next two years under the assumption that the Reserve Bank of Australia has been successful in lowering interest rate to increase economic activities. II. Major components of banks’ funding:
In general, there are five major components of banks’ funding including deposits, wholesale funding sources with short-term and long-term wholesale securities debt, equity and securitization. Deposits, in 2012, account for almost 54% of total banks’ funding. Wholesale funding, which comprise short-term and long-term wholesale debt, constitutes further 40% of bank funding. Long-term debt securities are those issued with the term to maturity of more than a year while short-term securities have term to maturity of less than 12 months. The long-term and short-term debt markets can be divided further into either domestic or offshore debt markets. Within domestic debt market, short-term securities debt is mainly money market securities and long-term securities debt is mainly bonds (Hunt, 2011, p. 43). Additionally, offshore debts, which can be either in foreign currency or in Australian dollar, are foreign liabilities raised overseas. Two others components of banks’ funding are equity and