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BM414 Financial Instruments and Institutions Level 4


Financial instruments are various assets, commodities or contracts in between parties which can be traded, created or modified using financial institutions. The two main types of financial tools are cash and derivative instruments. The values of cash assets are derived from the market whereas, the exchange-traded and over-the-counter (OTC) derivatives value is calculated by using interest rates.

Banking refers to lending and borrowing of monetary products.A bank either retail or commercial earns profit based on the difference between interest rate provided on savings account and the rate of loan provided to users for a particular period (Dodgson and Gann, 2014). Every financial institution has various forms of instruments of finance which are provided to ordinary people, multinational companies or others. Thus, the banking sector is growing tremendously and thereby providing better customer services through virtual systems. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide their fellow clients.

Australia is dominated by four major financial institutions which has a total of A$ 2.66 trillion assets together. These are:

  • National Australia Bank (NAB)
  • Australia and New Zealand Banking Group (ANZ)
  • Commonwealth Bank (CBA) and
  • Westpac (WBC)

The Westpac is among the top four banks of Australia whose headquarter is in Sydney which provides banking and financial services. Company was found in the year 1871 which has approximately 1500 branches at present. The firm earned a net total revenue of A$ 21.642 billion at the end of 2015 by rendering financial services to all. Another being NAB located in Melbourne earned revenue of 2,017.6 crores AUD in year 2015. The Australia and New Zealand Banking Group (ANZ) has total revenue of A$ 21.071 billion through rendering various financial services (Scott, Reenen and Zachariadis, 2017). Lastly, the Commonwealth Bank was found in 1911 that has reported revenue of A$26.005 billion in 2017 through banking services and investment plans (Parameswar, Dhir and Dhir, 2017).

The USA based institution providing banking services and financial assistance is Bank of America having headquarters in Charlotte, North Carolina. The bank was found in 1904 and is traded on NYSE. It is amongst the largest banks and is ranked at 2nd position with US $2.281 trillion revenue at the end of 2017. This banking institution of USA is a commercial banking institution which is amongst the four big banks along with Citigroup, JPMorgan Chase and Wells Fargo (Egan, Hortaçsu and Matvos, 2017).

Technological Innovations:

The US and Australian banking system is improvising continuously and is engaged in virtual banking which implies banking services at any time and any place. The globalization and modernization of economy has impacted banking sector thereby, bringing technological advances. With innovation and technology, the commercial banking system is evolving through the use of virtual system which has eradicated the traditional banking methods of teller-staffed branches and systems based on human resources. Since the banking sector plays an important role in uplifting an economy it has been affected by various factors both internally and externally. Today, the world is witnessing tremendous developments due to use of technology. The technological innovations have removed the traditional ways of banking through face-to-face interaction and brought electronic banking system which has eased every process. The use of ATM's and mobile banking has provided significant increase in total income and has reduced expenses as well as costs to banking and financial institutions (Dodgson and Gann, 2014).

The physical products and services are shifted to virtual and electronic products due to internet and World Wide Web facilities. The use of internet based technology has provided opportunities like informational and transactional banking. Because of technology, banks have become global providing services 24 hours. Technological innovation plays a vital role in providing commercial banking services as well as chosen investments have the potential to raise net income and net interest margin which will affect country's economy. The Australian banking environment has been affected by technological innovations in a positive manner. Technology has enhanced the services to customers, improved productivity of business firms and created new business opportunities thereby providing employment to many. Advances in technology has provided greater customer value through transparent online services (Parameswar, Dhir and Dh

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