‘Supervisory Developments: The Reserve Bank’s Perspective’

Over the past 10 to 15 years banking (and the financial system more generally) has been dramatically transformed by deregulation, product innovation, the internationalisation of markets, and more volatile financial prices. Continuing change is assured by advances in communications, computing capacity and financial theory. Transaction and information costs will fall further, and the unbundling and repackaging of traditional services will increase. Competition among various parts of the financial system has been intensified by a narrowing of distinctions among some products and easier access to overseas markets. In addition, securities markets and funds managers are tending to displace intermediation in certain market segments, with the prospect of greater reliance on wholesale funding by high quality borrowers and of better quality assets moving off banks’ balance sheets through securitisation. Such competition, and the lifting of regulatory restrictions on their activities, have raised both the willingness and capacity of banks to accept credit and other risks. In response to pressures and opportunities banks have also diversified into a wider and more complex range of products. An increasing ‘Supervisory Developments: The Reserve Bank’s Perspective’