Banks in Australia utilize various avenues to secure funding for their operations. A substantial portion of their funds comes from deposits made by customers, serving as a primary source of liquidity for these financial institutions. Deposits encompass a significant share of Australian banks’ funding, offering a secure and stable base. This includes savings accounts, term deposits, and other forms of deposit products that customers use to store their money.
In addition to customer deposits, Australian banks tap into the financial markets to raise capital. They issue bonds and other debt securities, constituting approximately one-third of their total funding. These financial instruments are traded in markets, allowing banks to access a broader pool of capital beyond traditional deposits. By issuing bonds, banks can attract investors seeking fixed-income securities, thereby diversifying their funding sources and managing risk.
Moreover, equity plays a role in Australian banks’ funding structure. Banks can raise capital by issuing shares that are traded on the stock market. This form of funding represents the remainder of their overall funding. When banks offer shares to investors, they are essentially selling ownership stakes in the institution. This not only generates capital for the banks but also allows investors to participate in the bank’s profits and losses.
(Response: Australian banks borrow money from various sources, including customer deposits, bonds and debt securities issued in financial markets, and equity from shares listed on the stock market.)