The Australian banking and finance industry is currently experiencing some of the most radical changes since the first banks were established in this country in the early 1800's. Such changes are the consequence of the combined effects of the deregulation process and the rapid development in technology.
The evolution of the financial system as it adjusts to deregulation and the impact of new technology will nevertheless test the decision resulting in its perpetration.
In the words of a Citibank Vice-President, Charles Long, in an address to the Nevada Bankers Association on May 21, 1984: "There is a fundamental contradiction about attempting to regulate in a world where the tendency is to move forward, not stand still. Regulators inevitably fight the last war. Regulators may have a grasp on what has been but they have a tough time anticipating what's to come."
Banking and finance is now a truly global business. International banks, domestic banks and other financial institutions trade or deal actively in foreign exchange, deposits, loans and in fact most financial instruments virtually continuously around the globe. As trading in one centre closes institutions shift their activities to the financial centre in the next major time zone or geographic region, thereby taking advantage of market conditions in the next centre.
This situation reflects the gradual internationalisation and deregulation of most economic activities - most notably, trade, investment and banking operations - as the world has become both economically and financially more interdependent.
This research paper investigates the implications of the "new order" of banking in a deregulated Australian financial environment, after investigating the domestic background against which the domestic and new foreign banks are gearing up to take on a deregulating world's new risks and rewards.
Deregulation may present financial institutions with virtually limitless opportunities to succeed or to fail. It is the purpose of this paper to review the implications of deregulation as they relate to all facets of the financial system whilst comparing the Australian experience to major offshore centres.