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Australia’s Banking Industry

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Australia’s Banking Industry Date: May 2011 Disclaimer This publication has been prepared as a general overview of the Banking Industry in Australia and does not constitute and is not intended to constitute financial product advice as defined under the Corporations Act 2001 (Cwth). Nothing in this document should be construed as a recommendation or statement of opinion intended to influence a person in making an investment decision. The information is made available on the strict understanding that the Australian Trade Commission (Austrade) is not providing professional advice.

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While all care has been taken in the preparation of this publication, Austrade expressly denies liability for any loss or damage of any nature (including but not limited to any errors or omissions) arising out of or connected with reliance on the contents of this publication. Any person relying on this publication does so entirely at their own risk. Austrade strongly recommends that the reader obtain independent professional advice prior to making any investment decision.

Austrade’s role in the promotion of Australian trade includes facilitating engagement by Australian financial services exporters in markets outside Australia.

Austrade is not a promoter of any financial services products or investments and does not provide investment advice. Austrade assumes no responsibility however so arising for any company, product or service mentioned in this document, nor for any materials provided in relation to such products, nor for any act or omission of any business connected with such products. Investors should always make their own enquiries as to whether an investment is appropriate for their needs and should consult an independent and licensed advisor.

Contents Executive Summary Australia’s Banking Industry Market Participants Banks Credit Unions Building Societies Non-Deposit-Taking Finance Companies Retail Banking Size and Scope Residential Mortgages Credit Cards Margin Lending Deposits Private Wealth Retirement or Superannuation savings Self-Managed Superannuation Funds Government Reforms ‘Competitive and Sustainable Banking’ Commercial Banking and Corporate Finance Scope Market Participants Authorised Deposit-taking Institutions Boutique Advisory Firms and

Securities Brokers Specialised Finance Companies Commercial Lending Syndicated Debt Project and Infrastructure Finance Trade Finance Corporate Finance and Advisory Mergers and Acquisitions Equity Capital Markets Debt Capital Markets Asset-backed Securities Kangaroo Bonds Over-the-counter and exchange-traded markets Transaction Services – Payments System Operations Processing Regulation and Tax Environment Regulation of the financial system Overview Australian Prudential Regulation Authority Australian Securities and Investments Commission Reserve Bank of Australia Federal Treasury Australian Competition and Consumer Commission 5 6 9 9 11 12 12 13 13 14 15 16 16 18 18 18 19 21 21 21 21 21 21 22 25 26 28 30 30 30 33 36 37 39 40 40 44 44 44 44 45 45 45 45 Other regulatory agencies Summary of available operating models Overview Australian Credit Licence Available options Summary of requirements for each option The authorisation and application processes Australian financial services licences Introduction What is a financial service? What is a financial product? Retail and wholesale clients Other considerations Privacy laws Anti-money laundering and similar laws New laws to change the way to take security in Australia Taxation Summary Taxation of business profits Taxation treatment of funding options When is interest withholding tax payable?

Exemptions from IWT Notional borrowing by an Australian branch of a foreign bank Deductibility of IWT Phasing down Australian IWT for financial institutions Special treatment for offshore banking units Thin capitalisation Useful Links Appendix A – Banking Institutions Appendix B – Credit Unions and Building Societies Appendix C – Foreign Retail Banks in Australia Appendix D – International Expansion of Australia’s Largest Banks Appendix E – Selected Australian Legal and Accounting/Tax Advisors in Financial Services Appendix F – Infrastructure Australia’s Reform and Investment Priorities Appendix G – Capital Expenditure in Australia’s Mining Sector Appendix H – Transaction Services – Payments System Regulation Payments System Access Points Payment Settlements Future Trends 45 46 46 46 46 47 51 52 52 52 52 53 53 53 53 53 54 54 55 55 55 55 56 56 56 57 57 58 59 60 62 64 67 68 70 72 72 72 73 73 Australia’s Banking Industry >3 Australia ranked fifth amongst the world’s leading financial systems and capital markets in the 2010 World Economic Forum Financial Development report. Executive Summary Australia has a strong, profitable, sophisticated and well regulated banking sector which is welcoming of new entrants and increasingly engaged in regional and global markets.

The financial sector is the largest contributor to Australia’s national output, around 11 per cent of Australian output or A$135 billion of real gross value added in 2010. 1 Australia ranked fifth amongst the world’s leading financial systems and capital markets in the 2010 World Economic Forum Financial Development report. Total assets of Australia’s banks, defined as Authorised Deposittaking Institutions (ADIs)2, were A$2. 7 trillion. Australia has four large domestic banks (the “four pillars”) that provide full service retail and commercial lending to the Australian economy; Australia and New Zealand Bank (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Westpac Banking Corporation (WBC).

Each has a AA rating (Standard & Poor’s) with only nine of the top 100 banks globally enjoying a rating of AA or higher. 3 Foreign banks4 are also well represented in the Australian market with 20 of Forbes’ top 25 banking institutions having a presence in Australia. The majority of these foreign competitors are focused on commercial banking and capital market activities, although a number are now significant players in the retail banking market. Australia’s retail banking sector is relatively concentrated, with twenty one banks providing the bulk of banking services to consumers (12 domestic banks, 9 foreign owned subsidiaries). Consumer lending in Australia totalled A$1. trillion as at October 2010, of which the largest component is mortgage lending. While the major Australian banks have dominant market shares across most consumer finance lines, there is also increasing competition from foreign banks and regional Australian banks and competition from non-bank lenders (credit unions, building societies and non-deposit-taking specialist finance companies). Australia’s payments system has undergone, and continues to undergo, change designed to increase competition and innovation. Australians are early adopters of new technology, as reflected in the significant growth in electronic payments, EFTPOS and ATMs in the country.

The commercial banking and corporate finance and advisory sector incorporates a full range of services provided to commercial, corporate, government and institutional sectors. Specialist expertise exists in mining and resources, infrastructure and project finance (including public-private partnerships), agriculture, and property. Competition in this sector includes the major and regional domestic banks, foreign banks, securities brokerage companies, specialised corporate advisory firms, and asset finance companies. Australia’s commercial and corporate advisory market comprises: › › › › › A$620 billion commercial lending market. A sizeable syndicated loans market that has raised US$336 billion over the five years to 2010, equivalent to 2. 1 per cent of world issuance.

The second largest project finance market in Asia-Pacific after India, with US$14. 6 billion worth of deals in 2010, or 15 per cent of the region’s total. The second largest free-floating stock market in the Asia-Pacific region, and sixth largest globally, with a capitalisation of US$1. 1 trillion and 2,072 listed companies. One of the three largest Mergers and Acquisitions markets in Asia-Pacific, with announced deals totalling US$132 billion in 2010 and US$528 billion for the five years to 2010; 3. 5 per cent of globally announced deals. The second largest Equity Capital Market in Asia-Pacific and fifth largest globally, with US$199 billion of equity issuance over the five years to 2010.

A securitisation market that has resumed growth following the global financial crisis, with A$19. 5 billion in RMBS issuance in 2010, up from A$9. 9 billion in 2008. A fast growing Kangaroo bond market that has increased from A$9 billion to A$129 billion bonds outstanding over the ten years to October 2010 – a compound annual growth rate of 28 per cent. The world’s seventh largest foreign exchange market with total FX turnover averaging US$192 billion per day in April 2010. The US$/A$ pair being the world’s fourth most traded pair after the Euro, Yen and Pound Sterling. The Asia-Pacific’s second largest pension fund industry after Japan, at US$1,261 billion in 2010 – and, by some measures the fourth largest globally. › › › › ›

Australia’s banking sector has sought to leverage the country’s strengths in natural resources, infrastructure, public-private partnerships, property and related capital market activities. Foreign banks operating in Australia have also been attracted by our reputation for product innovation, advanced capital and risk management systems, our highly skilled workforce and our proximity to key regional markets. Decisions have also been influenced by our political stability, strong rule of law, transparent and highly regarded regulatory environment, advanced social and economic infrastructure, and enviable lifestyle. 1. Australian Bureau of Statistics cat no. 5206. – Australian National Accounts: National Income, Expenditure and Product, Dec 2010 (released 02 Mar 2011), Table 6, Gross Value Added by Industry, chain volume measured. 2. ADIs include banks, credit unions and building societies. 3. Ranked by The Banker, “Top 1000 World Banks 2010”, 6 July 2010. 4. Includes foreign banks with locally incorporated subsidiaries, a foreign bank branch licence or representative office. Australia’s Banking Industry >5 Australia’s Banking Industry The financial sector is the largest contributor to Australia’s national output, generating more than 10 per cent of Australian output or A$135 billion of real gross value added in 2010. As at February 2011, total assets of Australia’s banks,6 stood at A$2. 7 trillion accounting for around 56 per cent of the total A$4. 9 trillion in financial sector assets. This represents a compound annual growth rate (CAGR) of 13 per cent over the past decade. Australia’s Financial Sector Assets – September 2010 (A$ Billion) General Insurance Of? ces $134b or 2. 7% Securitisation Vehicles $141. 6b or 2. 9% Life of? ces, Superannuation Funds & Other Managed Funds $1,707b or 35. 0% Authorised deposit-taking Institutions $2,724b or 55. 9% Registered Financial Corporations $169b or 3. 5% Sources: Reserve Bank of Australia, Statistical Table B1, Assets of Financial Institutions (updated 1 Feb 2011); Austrade

Australia ranks 12th in the world in terms of bank assets as rated by The Banker, Top 1000 World Banks, December 2009. Among 21 countries surveyed by the Asian Bankers 500, Australia has the third largest pool of bank assets in the region after Japan and China. Australia’s total bank assets accounted for around 240 per cent of the country’s nominal GDP, well above Japan (193), China (178), South Korea (146), India (102), and the regional average (176). 5. Australian Bureau of Statistics cat no. 5206. 0 – Australian National Accounts: National Income, Expenditure and Product, Dec 2010 (released 02 Mar 2011), Table 6, Gross Value Added by Industry, chain volume measured. 6.

Defined as Authorised Deposit-taking Institutions (ADIs), which includes banks, credit unions and building societies. 6 > Australian Trade Commission The Asian Banker Top 500 Banks Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Country Japan China Australia India Korea Hong Kong Taiwan Singapore Malaysia Thailand New Zealand Indonesia Vietnam Philippines Pakistan Bangladesh Sri Lanka Macau Myanmar Brunei Cambodia TOTAL Numbers of Banks in AB500 123 103 14 43 13 18 35 4 17 14 8 27 19 15 15 17 6 5 2 1 1 500 Total Assets (US$ Billion) 9,779. 7 8,853. 4 2,388. 6 1,258. 9 1,213. 5 1,143. 0 958. 7 488. 5 405. 2 273. 0 230. 4 214. 6 97. 9 97. 6 67. 0 26. 0 17. 1 14. 3 12. 0 1. 0. 9 27,542. 1 Regional Market Share % 35. 51 32. 14 8. 67 4. 57 4. 41 4. 15 3. 48 1. 77 1. 47 0. 99 0. 84 0. 78 0. 36 0. 35 0. 24 0. 09 0. 06 0. 05 0. 04 0. 01 0. 00 100. 00 Total Assets % of GDP 192. 9 177. 6 240. 2 101. 8 145. 8 542. 8 253. 3 268. 1 210. 0 103. 4 195. 6 39. 8 105. 1 60. 5 41. 4 27. 5 40. 5 67. 4 35. 0 17. 3 8. 3 176. 2 2009 GDP (US$ Billion) 5,069 4,985 994 1,237 833 211 379 182 193 264 118 539 93 161 162 95 42 21 34 10 11 15,633 Sources: The Asian Banker 500, Issue 101 October 2010; GDP data was sourced from IMF World Economic Outlook October 2010; Macau GDP was sourced from Statistics and Census Service Macau; Austrade

Australia’s four major banks are amongst the world’s 100 largest by assets and are four of only nine global banks with a rating of AA or higher by Standard & Poor’s. Moody’s rating for the four major Australian banks is Aa2, with stable outlook (18 May 2011). World’s 100 Largest Banks’ Credit Rating 3,000 Australia’s four major banks Assets US$ Billion (as of 31 December 2009) 2,500 2,000 1,500 1,000 500 0 AAA AA AAA+ A ABBB+ BBB BBBNR Sources: This chart was sourced from the Reserve Bank of Australia Financial Stability Report March 2009, page 25, Graph 38, and updated with the 2009 data of banks assets from The Banker 1000 World Banks 2010 and Standard and Poor’s Credit Ratings (downloaded 27 July 2010) from Bloomberg; Austrade

The top Australian banks are also within the top 25 banking institutions as ranked by Forbes in its April 2010 top 2,000 companies. 7. The Banker, “Top 1000 World Banks 2010”, 6 July 2010. Australia’s Banking Industry >7 The Forbes World’s Leading Companies Rank1 1 3 5 6 7 8 11 17 21 22 29 34 43 44 48 51 52 53 54 59 67 73 79 83 86 Company JPMorgan Chase Bank of America ICBC Banco Santander Wells Fargo HSBC Holdings BNP Paribas China Construction Bank Barclays Bank of China Lloyds Banking Group UniCredit Group Deutsche Bank Credit Suisse BBVA-Banco Bilbao Vizcaya Banco Bradesco Banco do Brasil Royal Bank of Canada Intesa Sanpaolo Commonwealth Bank Westpac Banking Group Credit Agricole National Australia Bank ANZ Banking Toronto-Dominion Bank

Country USA USA China Spain USA UK France China UK China UK Italy Germany Switzerland Spain Brazil Brazil Canada Italy Australia Australia France Australia Australia Canada Sales 115. 6 150. 5 71. 9 109. 6 98. 6 103. 7 101. 1 59. 2 65. 9 52. 2 106. 7 92. 2 63. 0 50. 3 49. 3 59. 1 56. 1 35. 4 50. 7 31. 8 31. 2 92. 0 32. 5 26. 9 23. 6 Profits 11. 7 6. 3 16. 3 12. 3 12. 3 5. 8 8. 4 13. 6 15. 2 9. 5 4. 6 5. 6 6. 9 6. 1 6. 0 4. 6 5. 8 3. 6 3. 6 3. 8 3. 0 1. 6 2. 3 2. 6 2. 9 Assets (US$ Billion) 2,032. 0 2,223. 3 1,428. 5 1,438. 7 1,243. 7 2,355. 8 2,952. 2 1,106. 2 2,223. 0 1,016. 3 1,650. 8 1,438. 9 2,150. 6 988. 9 760. 4 281. 4 406. 5 608. 1 877. 7 500. 2 519. 0 2,227. 2 574. 4 420. 5 517. 3 Market Value 166. 2 167. 6 242. 2 107. 1 141. 7 178. 3 86. 7 184. 3 56. 2 147. 0 50. 3 44. 0 39. 8 53. 9 48. 2 54. 5 42. 78. 2 44. 7 75. 1 71. 0 34. 4 48. 8 53. 7 55. 4 1. Forbes’ rank according to an equal weighting of sales, profits, assets and market value. Sources: Forbes, The World’s Leading Companies, April 2010; Austrade Australia is well positioned as a banking centre in the region, with 20 of Forbes’ top 25 banking institutions having a presence in Australia. Australia ranked fifth amongst the world’s 57 leading financial systems and capital markets in the World Economic Forum Financial Development Report 2010. In addition to its geographic position in the Asia-Pacific region, close to the world’s fastest growing economies, Australia offers: › › › › › › ›

A sizeable domestic economy – the fourth largest in the Asia-Pacific (after Japan, China and India); A highly skilled and multilingual workforce where 1. 4 million Australians speak an Asian language (equivalent to around onethird of Singapore’s, and one-fifth of Hong Kong’s entire population); Advanced business and IT infrastructure; A sophisticated investor base, including the third largest high-net-worth market in the region (after Japan and China); A stable political and economic environment, and an enviable quality of life; Strong and efficient regulatory environment and legal institutions; and Mature and innovative financial markets including: A leading pension fund market with A$1. 3 trillion in funds; The fourth largest pool of investment fund assets globally with A$1. trillion FUM; The second largest free-floating stock market in the Asia-Pacific with a market capitalisation of US$1. 2 trillion; A fast growing and liquid foreign exchange market having grown 12 per cent CAGR since 1998. › › › › 8 > Australian Trade Commission Market Participants Banks, credit unions and building societies – known as Authorised Deposit-taking Institutions (ADIs) – provide the bulk of banking services to Australian households, businesses and governments – and are prudentially regulated by the Australian Prudential Regulation Authority (APRA). Non-deposit taking finance companies also provide competition in selected consumer credit products. Banks Australia has a sound, well capitalised banking sector.

Its banks are large by global standards, with a strong retail base, highly developed wealth management capabilities, and full service commercial, trade finance and corporate advisory operations reaching out into the region. There are 56 banks operating in Australia (12 domestic banks, 9 foreign subsidiary banks and 35 foreign branch banks) with total resident assets of A$2. 4 trillion as 30 September 2010. 8 Australia’s banking sector offers opportunities for new entrants providing innovative products and distribution systems. Australian banks are increasingly looking to export their expertise in retail banking, funds management, private banking and distribution to the region.

The four major domestic banks have the largest market shares in the retail and commercial banking sectors: the Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac Banking Corporation (WBC). They accounted for 77. 49 per cent of resident assets (A$2. 4 trillion) as at September 2010. Other domestic banks accounted for 9. 2 per cent, while foreign bank subsidiaries and branches accounted for 13. 4 per cent. The largest of the other domestic retail bank competitors are Suncorp-Metway, Macquarie Bank, Bendigo Adelaide Bank and Bank of Queensland. Of the foreign banks with a subsidiary or branch licence, ING, Bank of Scotland, Citigroup, Deutsche Bank and HSBC have the largest presence as measured by Australian banking assets.

ING now ranks fifth in retail banking with its innovative, internet based model. Rabobank has built a strong regional footprint drawing on its rural heritage and is now looking to widen its scale of operations. In addition, there are a number of smaller foreign retail banking operations that target specific immigrant groups including the Arab Bank, Bank of China, Bank of Cyprus and Beirut Hellenic Bank. 8. APRA, Monthly Banking Statistics, September 2010 (issued 29 Oct 2010). 9. Includes Bank of Western Australia Ltd (wholly owned subsidiary of the Commonwealth Bank). Australia’s Banking Industry >9 Assets on Australian Books of Individual Banks (A$ Million)

September 2010 Westpac Banking Corporation Commonwealth Bank of Australia National Australia Bank Ltd Australia and New Zealand Banking Group Ltd Four Major Domestic Banks Bank of Western Australia Ltd1 Suncorp-Metway Ltd Macquarie Bank Ltd Bendigo and Adelaide Bank Ltd Bank of Queensland Ltd AMP Bank Ltd Members Equity Bank Pty Ltd Rural Bank Ltd Total Other Domestic Banks ING Bank (Australia) Ltd Citigroup Pty Ltd HSBC Bank Australia Ltd Rabobank Australia Ltd Investec Bank (Australia) Ltd Bank of Cyprus Australia Ltd Arab Bank Australia Ltd Beirut Hellenic Bank Ltd Bank of China (Australia) Ltd Total Foreign-owned Bank Subsidiaries Bank of Scotland plc Citibank, N. A. Deutsche Bank Aktiengessellschaft UBS AG JPMorgan Chase Bank, National Association BNP Paribas Cooperatieve Centrale Raiffeisen-Boerenleenbank B. A. The Royal Bank of Scotland Plc The Bank of Tokyo-Mitsubishi UFJ, Ltd The Hongkong and Shanghai Banking Corporation Ltd Top 10 Foreign-owned Bank Branches Other Foreign-owned Bank Branches Total Foreign-owned Bank Branches TOTAL 1. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia.

Sources: Australian Prudential Regulation Authority, Monthly Banking Statistics, September 2010 (issued 29 October 2010), Table 1; Austrade Resident Assets 528,148 515,805 407,793 360,592 1,812,338 70,877 70,813 60,560 41,306 32,901 7,746 6,255 4,126 294,584 46,572 22,449 17,917 11,819 4,580 1,483 1,363 950 472 107,605 25,211 22,402 20,819 16,617 15,057 14,452 13,046 11,828 8,684 8,368 156,484 62,878 219,362 2,433,889 10 > Australian Trade Commission Credit Unions Credit unions operate predominately in the ‘retail’ sector with business driven by deposit taking, consumer credit and housing loan finance. There is also a small proportion of commercially focussed business targeted at small and medium-sized enterprises (SMEs). 0 Many credit unions also distribute products in areas such as health insurance, travel and managed funds as a means of providing greater member value. Australia’s 107 credit unions had total assets as at September 2010 of A$50. 6 billion, which represented an increase of 8 per cent over the year. 11 This growth was driven predominantly by housing loans, which account for A$33. 9 billion (up more than 8. 5 per cent over the same period). There are approximately 900 credit union branches around Australia, although New South Wales is home to the bulk of these with 43. 3 per cent of all branches. Queensland accounts for the second largest number, with 17 per cent of credit union branches, followed by Victoria with 15. 7 per cent. 2 The level of concentration in the credit union sector is significant, with the top five credit unions – Credit Union Australia Limited, Australian Central Credit Union, Savings & Loans Credit Union (SA) Limited, Police and Nurses’ Credit Society, and NSW Teacher’s Credit Union – holding an estimated 42. 5 per cent of market share in terms of total industry revenue and 41. 8 per cent of total industry assets. 13 The credit union sector is going through a period of consolidation and has seen a number of mergers and acquisitions over the last five years, driven by the need to achieve further cost savings through economies of scale. The sector has a diverse range of small and large organisations with the largest credit union having in excess of 400,000 members and around A$7. 5 billion in assets. Top 5 Credit Unions Market Share (% of Revenue) 19. 0 7. 0 7. 0 5. 0 4. 5 Assets 2008-09 (A$ Million) 7,690 2,595 3,230 2,403 2,893

Credit Union Australia Ltd Australian Central Credit Union Ltd Savings & Loans Credit Union (SA) Ltd Police and Nurses’ Credit Society NSW Teachers’ Credit Union Sources: Annual Reports, IBISWorld Industry Report K7323, Credit Unions in Australia, November 2010, page 23 A list of Australian authorised credit unions as at August 2010 is provided in Appendix B. More information on this sector is available through ABACUS, the peak body representing mutual financial institutions, at www. abacus. org. au. 10. IBISWorld estimates that approximately 4 per cent of Credit Union business is with the commercial sector. IBISWorld Industry Report K7323, Credit Unions in Australia, November 2010. 11.

APRA, Quarterly Credit Union and Building Society Performance, September 2010 (issued 30 November 2010). 12. IBISWorld Industry Report K7323, Credit Unions in Australia, August 2010, page 16. 13. Ibid, page 23. Australia’s Banking Industry > 11 Building Societies Australia’s 11 building societies had total assets as at September 2010 of A$24. 6 billion, which represented an increase of 8. 7 per cent over the year. 14 This growth was driven predominantly by housing loans, which account for A$16. 5 billion (up 9. 9 per cent over the same period). Similarly to credit unions, the bulk of building society business is in the retail sector, with less than 10 per cent of their activities estimated to be in the commercial sector. 5 Building societies tend to target their financing in niche and rural markets that are not adequately covered by the banks. 16 They are predominantly located in NSW and Queensland, which are home to an estimated 86 per cent of the industry’s establishments. The level of concentration in the building society sector is high, with the top four having around 80 per cent of industry revenue and over 95 per cent of industry assets. 17 Top 4 Building Societies Heritage Building Society Limited Newcastle Permanent Building Society Illawarra Mutual Building (IMB) Society Greater Building Society Market Share (% of Revenue) 25. 0 22. 0 17. 0 15. 4 Assets 2008-09 (A$ Million) 7,114 6,303 4,444 4,106

Source: Annual Reports, IBISWorld Industry Report K7322, Building Societies in Australia, August 2010, page 21 A list of Australian authorised building societies as at August 2010 is provided in Appendix B. More information on this sector is available through ABACUS, the peak body representing mutual financial institutions, at www. abacus. org. au. Non-Deposit-Taking Finance Companies Non-deposit-taking finance companies represent another significant group of institutions that service the retail banking sector in Australia. These institutions do not take deposits but have traditionally provided strong competition in consumer lending, such as mortgage lending, credit cards, and asset or lease financing (i. e. , motor vehicles, computers, furniture).

Examples of non-deposit-taking finance companies in Australia include GE Money, Liberty Financial, Resi, La Trobe Financial Services, AIMS Financial Group, Assured Home Loans, Rate Busters and Home Star. As these institutions do not take deposits, they are not required to hold a banking license. However, once they reach a certain size (total assets exceeding A$5 million), they are generally required to register as a registered finance corporation, for the purposes of the Financial Sector (Collection of Data) Act, 2001. Further information, including a list of registered financial corporations, is available from the APRA website at http://www. pra. gov. au/RFC/Registered-Financial-Corporations. cfm. More information on this sector is available through the Australian Finance Conference at www. afc. asn. au, and the Australian Equipment Lessors Association, at www. aela. asn. au. 14. APRA, Quarterly Credit Union and Building Society Performance, September 2010 (issued 30 November 2010). 15. IBISWorld Industry Report K7322, Building Societies in Australia, August 2010. 16. IBISWorld Industry Report K7322, Building Societies in Australia, August 2010. 17. Ibid. 18. APRA website at www. apra. gov. au/ADI/ADIList. cfm#AOBC 12 > Australian Trade Commission Retail Banking Size and Scope

Consumer lending in Australia has continued to grow rapidly over the past decade, at a compound annual growth rate (CAGR) of 12. 6 per cent – although in more recent years this growth rate has slowed to single digits. As at October 2010, total housing and other personal credit from Australia’s financial intermediaries reached A$1. 3 trillion. House lending for owner occupiers and investors accounted for 89 per cent of total consumer credit outstanding. Australia’s Consumer Credit (Incl. Securitisation) – Year End, A$ Billion 1,400 Mortgage – Owner-occupier (13. 5%) Mortgage – Investor (13. 4%) Other personal (7. 2%) 1,200 1,000 A$ Billion 800 600 400 200 0 Oct-2000 Dec-2000 Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005 Year End Dec-2006 Dec-2007

Dec-2008 Dec-2009 Oct-2010 Note: The number in the brackets represents compound annual growth rate since 2000. Sources: Reserve Bank of Australia, Statistical Table D2 Lending and Credit Aggregates (Last updated 30 Nov 2010); Austrade Banks provide the majority of credit to Australian households with a market share of 83 per cent, representing almost A$1. 1 trillion as at September 2010. Banks providing deposit-taking services to the household sector are required to be locally incorporated and are prudentially regulated by APRA. There are 12 domestic banks and nine foreign bank subsidiaries in Australia – see Appendix A for full list of banks.

The table following provides an overview of household loans held by banks as at 30 September 2010. Consumer lending in Australia, defined as loans and advances to households, accounted for 70 per cent of total bank loans and advances. The four major banks accounted for 87 per cent of all household loans, while the other domestic banks accounted for 7. 6 per cent, and foreign bank subsidiaries held 5. 4 per cent. Australia’s Banking Industry > 13 Loans and Advances to Household on Australian Books of Individual Banks (A$ Million) Households Credit Cards 9,397 8,566 5,101 7,965 31,029 1,260 6 267 – 359 – 137 2,029 – 4,586 991 – – – – – – 5,577 38,635

September 2010 Westpac Banking Corporation Commonwealth Bank of Australia National Australia Bank Limited Australia and New Zealand Banking Group Ltd Four Major Domestic Banks Bank of Western Australia Ltd1 Suncorp-Metway Ltd Bendigo and Adelaide Bank Ltd Bank of Queensland Ltd Macquarie Bank Ltd AMP Bank Ltd Members Equity Bank Pty Ltd Total Other Domestic Banks ING Bank (Australia) Ltd Citigroup Pty Ltd HSBC Bank Australia Ltd Arab Bank Australia Ltd Bank of China (Australia) Ltd Bank of Cyprus Australia Ltd Beirut Hellenic Bank Ltd Rabobank Australia Ltd Investec Bank (Australia) Ltd Total Foreign-owned Bank Subsidiaries TOTAL Housing: Owner-occupied 184,755 169,375 101,098 107,614 562,842 29,993 18,304 12,028 9,455 1,167 3,830 2,978 77,755 27,458 4,785 2,910 126 208 167 122 189 16 35,981 676,593 Housing: Investment 82,190 79,166 49,607 41,207 252,170 8,199 8,099 6,792 7,862 585 1,418 769 33,724 9,240 2,442 3,199 116 141 46 222 23 – 15,429 301,341 Other 15,403 9,754 17,900 13,806 56,863 569 670 2,516 315 4,520 417 144 9,151 – 1,133 162 143 8 141 1 – – 1,588 67,653 Total 291,745 266,861 173,706 170,592 902,904 40,021 27,079 21,603 17,632 6,631 5,665 4,028 122,659 36,698 12,946 7,262 385 357 354 345 212 16 58,575 1,084,222 1.

BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia. Sources: Australian Prudential Regulation Authority, Monthly Banking Statistics, September 2010 (issued 29 October 2010), Table 2; Austrade Residential Mortgages The residential mortgage market in Australia is by far the largest category of loans to households, representing 90 per cent of all bank lending to the household sector. Since 2000, bank mortgage loans for owner-occupied and investment properties have increased much faster (13. 5 per cent p. a) than other consumer credit (7. 2 per cent p. a. ). Australian laws place full recourse lending to residential mortgages in Australia at a national level.

This has provided homogeneity across the national mortgage market and places greater responsibility for the loan on the borrower than has been the case in some overseas jurisdictions. Australia’s market is characterised by high levels of Lender’s Mortgage Insurance. This is an additional charge, borne by the lender and often passed on to the borrower, which serves to meet any shortfall arising between the proceeds from foreclosure on the collateral (e. g. , residential property) and the loan amount. Typically, lenders require such insurance where the borrowers’ loan to valuation ratio exceeds 80 per cent. Tax laws are favourable towards residential property ownership, with capital gains tax exempt for owner occupiers and discounts of up to 50 per cent available for investors who own for periods greater than 12 months. 9 Investors can also offset the interest expenses and property costs against their income, including other income sources. If their property expenses exceed their property income, these expenses can be ‘negatively geared’ against other personal income sources. 19. Australian Taxation Office http://www. ato. gov. au/ 14 > Australian Trade Commission In July 2010, regulatory oversight for consumer credit protection laws was transferred from the state governments to the federal government under the National Consumer Credit Protection Act 2009. The Act largely replicates the previous statebased Uniform Consumer Credit Code (UCCC). These laws are designed to protect Australian consumers from predatory or unscrupulous lending practices.

The emphasis is placed on the provider to ensure that the borrower has the capacity to borrow, is properly informed of their responsibilities and that loans are not written in an unfair or misleading manner. Under these laws, the provider is to access the borrower’s capacity to repay; all the repayments, fees and charges associated with the credit provided (including a change in repayments due to the ending of a ‘honeymoon’ interest rate period). For further information see Regulatory and Tax Environment section. Credit Cards The credit card market in Australia has grown steadily over the past decade in terms of number of accounts, transactions and balances outstanding. As at October 2010, there were 14. million credit card accounts in Australia, the equivalent of 87 per cent of Australia’s adult population, with a total balance outstanding of A$48 billion. 20 The average outstanding balance is around A$3,200. Australia’s Credit and Charge Card Statistics (Values and Number, Not Seasonally Adjusted) 60,000 16 14 50,000 12 40,000 A$ Million Number of Accounts (‘000, RHS) 10 Number, ‘millions 30,000 8 6 20,000 Balances Outstanding (A$ Million, LHS) 4 2 10,000 0 Mar-2008 Sep-2008 Mar-2009 Sep-2002 Sep-2003 Sep-2004 Sep-2005 Sep-2000 Sep-2006 Sep-2001 Sep-2007 Sep-2009 Mar-2002 Mar-2003 Mar-2004 Mar-2005 Mar-2000 Mar-2006 Mar-2001 Mar-2007 Mar-20010 Sep-20010 0

Sources: Reserve Bank of Australia, Statistical Table C1 Credit and Charge Card Statistics (Last updated 30 Nov 2010); Austrade Credit cards are provided by domestic and foreign banks, credit unions, building societies and some specialised credit card providers. In recent years, some banks have provided white labelling services to other mass market channels such as retailers and airlines. Many of Australia’s largest retailers, such as Coles, David Jones, Harvey Norman, Myer and Woolworths have credit card offers. Within the banks, the four major banks account for 83. 6 per cent21 of total bank credit card loans outstanding, while other domestic banks account for 1. 6 per cent, and foreign banks, 14. 4 per cent. 2 The foreign bank share of the credit card market is dominated by two institutions, Citigroup and HSBC, with Citigroup having the bulk of credit card loans outstanding (around 12 per cent market share), the fifth largest provider after the major domestic banks. 20. Reserve Bank of Australia, Statistical Table C1, Credit and Charge Card Statistics as at October 2010. 21. Includes Bank of Western Australia Ltd (wholly owned subsidiary of the Commonwealth Bank). 22. Australian Prudential Regulation Authority, Monthly Banking Statistics, September 2010 (issued 29 October 2010), Table 2. Australia’s Banking Industry > 15 Margin Lending Margin lending has developed as another consumer credit product over the past two decades.

Margin lending is borrowing to invest in financial securities – typically listed shares or managed funds. Each individual security can be leveraged up to a set loan to value ratio (LVR). If the securities’ move outside of the allowed valuation limit, borrowers are issued a ‘margin call’ that requires them to either add cash to their margin account or to sell down existing securities to bring the loan back under the LVR limit. Over the ten years to September 2010, balances outstanding on margin loans grew at 10 per cent (CAGR) to A$17. 8 billion. Growth was rapid during the seven years to 2007, but reduced following the global financial crisis. Today, there are 205,000 client accounts.

Quarterly statistics published by the Reserve Bank of Australia indicate that the average loan to security valuation is 37. 5 per cent, with a mean loan size of A$91,000. Australia’s Margin Lending (September each year) 40 35 30 25 Number of Accounts Margin Lending Credit Outstanding (A$ Billion) 250,000 200,000 150,000 20 15 10 50,000 5 100,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 Sources: Reserve Bank of Australia, Statistical Table D10; Austrade Deposits As at September 2010, total deposits23 (retail and corporate/wholesale) held by banks, credit unions and building societies were A$1,485 billion, significantly up from A$780 billion five years ago.

This represents a compound annual growth rate of 13. 7 per cent since September 2005. Banks account for 95 per cent of these deposits. The following table provides an overview of household deposits held by banks24 as at 30 September 2010. Deposits sourced from households amounted to $477. 8 billion and accounted for 37 per cent of total bank deposits, with the remainder sourced from businesses, governments and institutions. The four major banks accounted for 78. 725 per cent of all deposits, while the other domestic banks accounted for 10. 4 per cent and foreign banks26 11. 0 per cent. 23. Reserve Bank of Australia, statistical tables B3, B7 and B8. 24.

The domestic books of a bank has the following scope: includes operations/transactions booked or recorded inside Australia; does not consolidate Australian or offshore controlled entities; includes transactions of Australian-based offshore banking units; excludes transactions of overseas-based offshore banking units; excludes offshore branches; and excludes transactions, assets and liabilities with offshore. 25. Includes Bank of Western Australia Ltd (wholly owned subsidiary of the Commonwealth Bank). 26. Includes foreign owned subsidiary and foreign branch licenced banks. 16 > Australian Trade Commission Deposits on Australian Books of Individual Banks (A$ Million)

September 2010 Commonwealth Bank of Australia Westpac Banking Corporation National Australia Bank Ltd Australia and New Zealand Banking Group Ltd Four Major Domestic Banks Bank of Western Australia Ltd1 Bendigo and Adelaide Bank Ltd Suncorp-Metway Ltd Macquarie Bank Ltd Bank of Queensland Ltd Members Equity Bank Pty Ltd Rural Bank Ltd AMP Bank Ltd Total Other Domestic Banks ING Bank (Australia) Ltd HSBC Bank Australia Ltd Citigroup Pty Ltd Rabobank Australia Ltd Investec Bank (Australia) Ltd Arab Bank Australia Ltd Bank of Cyprus Australia Ltd Beirut Hellenic Bank Ltd Bank of China (Australia) Ltd Total Foreign-owned Bank Subsidiaries BNP Paribas Citibank, N. A.

Deutsche Bank Aktiengessellschaft Bank of Scotland plc The Royal Bank of Scotland Plc The Bank of Tokyo-Mitsubishi UFJ, Ltd Cooperatieve Centrale Raiffeisen-Boerenleenbank B. A. Sumitomo Mitsui Banking Corporation The Northern Trust Company Mizuho Corporate Bank, Ltd Top 10 Foreign-owned Bank Branches Other Foreign-owned Bank Branches Total Foreign-owned Bank Branches TOTAL 1. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia. Households 130,008 113,058 64,865 66,840 374,771 14,349 17,265 14,680 7,015 14,896 1,271 1,320 1,254 72,050 17,095 3,876 6,256 1,830 242 377 459 491 309 30,935 0 59 59 477,815

Total Deposits 288,559 276,907 216,748 194,527 976,741 42,622 33,417 32,390 29,929 27,232 4,186 3,485 3,524 176,785 27,624 12,146 7,670 4,966 2,370 1,170 980 780 311 58,017 12,778 6,766 6,608 5,586 4,426 3,794 3,541 3,440 3,095 2,696 52,730 31,247 83,977 1,295,518 Sources: Australian Prudential Regulation Authority, Monthly Banking Statistics, September 2010 (issued 29 October 2010), Table 4; Austrade Australia’s Banking Industry > 17 Private Wealth Private wealth is a key driver of retail deposit demand. Australia’s private wealth market now ranks among the largest and fastest growing in the world. Since 1990, Australia’s total private sector wealth (including consumer durables, dwellings, deposits, shares and other equities, and reserves of life offices and pension funds) grew by 8. 3 per cent per annum to A$6. trillion. 27 Australia was the third largest high net worth individual (HNWI) market in the Asia-Pacific region and the 10th largest in the world in 2009. 28 The number of HNWI in Australia, defined as persons with greater than US$1 million in investable assets, grew 34. 4 per cent to reach 173,600, as at December 2009. Australia had almost 6 per cent of the region’s HNWI population, accounting for 5. 4 per cent of the region’s total wealth, with a combined value of US$519 billion. See Austrade’s publication on the Private Banking Industry in Australia http://www. austrade. gov. au/ArticleDocuments/2792/Private-Banking-in-Australia-Publication. pdf. spx Retirement or Superannuation savings In addition to voluntary savings, Australia has a mandatory retirement or superannuation savings regime which requires 9 per cent of income to be deposited in superannuation accounts which, generally speaking, can only be accessed their preservation age. Recently, the Government foreshadowed its intention to introduce legislation to gradually increase the compulsory level of superannuation savings to 12 per cent by 2019-20. 29 The pool of investment fund assets (including mandatory pension, self-managed superannuation and other investment assets) stands at A$1. 8 trillion, which by some measures is the fourth largest pool of savings globally. 0 The majority of these superannuation savings are managed by trustees of APRA-regulated superannuation funds and invested at arms-length by professional investment managers. See Austrade’s publication on the Investment Management Industry in Australia http://www. austrade. gov. au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia. pdf. aspx Self-Managed Superannuation Funds Self-Managed Superannuation Funds (SMSFs) are a superannuation fund managed by the members themselves as trustees of the fund. Each SMSF can have up to four members, where all members are required to be trustees. Statistics released by the Australian Prudential Regulation Authority in December 2010 show that the number of SMSFs grew from 412,560 to 439,397 over the past 12 months. SMSFs now hold A$420. billion, or 32 per cent of the nation’s A$1. 3 trillion superannuation pool. The latest Multiport SMSF Investment Patterns Survey October 2010 revealed that SMSF members allocated 21. 8 per cent of their assets to cash and short-term deposits in September 2010. 27. Private wealth is defined as the sum of household dwellings, household consumer durables (including market values of motor vehicles, furnishings and other household equipment), and household and unincorporated enterprises’ financial assets (including deposits, assets of life offices, superannuation funds and friendly societies, shares and other equity, unfunded superannuation claims and all other).

Data sourced from Reserve Bank of Australia, Statistical Table B20. 28. Merrill Lynch Capgemini, World Wealth Report 2010 and Asia-Pacific Wealth Report 2010. See also Austrade’s data alert http://www. austrade. gov. au/ ArticleDocuments/2792/Data-Alert-101013-Asia-Pacific-Wealth-Report. pdf. aspx 29. See the Australian Governments ‘A tax plan for our future’ http://www. futuretax. gov. au/pages/FairerSuperannuation. aspx 30. See Austrade’s publication ‘Investment Management Industry in Australia’ http://www. austrade. gov. au/ArticleDocuments/2792/Investment-Management-Industry-inAustralia. pdf. aspx 18 > Australian Trade Commission Superannuation Industry in Australia

Assets (A$ Billion) Jun 2009 Jun 2010 By fund type Corporate Industry Public Sector Retail Sub Total Pooled Superannuation Trusts Small APRA funds Single-member ADFs Self-managed Super Funds TOTALB a Number of Entities Jun 2009 Jun 2010 54. 0 191. 8 153. 0 304. 7 703. 5 69. 7 2. 0 0. 1 334. 2 35. 5 1,075. 3 56. 2 225. 5 175. 3 339. 0 795. 9 79. 1 1. 6 0. 0 390. 8 38. 9 1,227. 2 190 67 40 166 463 82 4,277 112 401,929 – 406,863 168 65 39 154 426 79 3,869 103 428,198 – 432,675 Balance of Life Office Statutory Funds a. Estimated data on self-managed superannuation funds are provided by the Australian Taxation Office (ATO). b. Total assets does not include pooled superannuation trusts. Sources: Australian Prudential Regulation Authority Statistics, Quarterly Superannuation Performance, June 2010 (issued 9 September 2010); Austrade

Government Reforms: ‘Competitive and Sustainable Banking’ In December 2010, the Australian Government announced three broad streams of reform across the Australian banking system, titled ‘Competitive and Sustainable Banking System’. › › › Stream One: Empower consumers to get a better deal. Stream Two: Support smaller lenders to compete with big banks. Stream Three: Secure the long-term safety and sustainability of our financial system. These reforms are aimed at boosting consumer flexibility to transfer deposits and mortgages; banning exit fees on new home loans; empowering the Australian Competition and Consumer Commission (ACCC) to prosecute anti-competitive price signalling; and a community awareness and education campaign.

The Government will also introduce a new official ‘Government Protected Deposits’ symbol for ADIs, regulated by APRA, to help consumers identify that their deposits, up to a certain cap, have the protection of the Financial Claims Scheme (FCS) in the unlikely event that the entity is wound up. The FCS, which was introduced in October 2008, is to be made a permanent feature of the Australian financial architecture and the Government has been working with the Council of Financial Regulators to determine an appropriate cap to apply from October 2011 onwards. The current cap is A$1 million per depositor per ADI. Funding sources will be supported through additional Government investments in high quality AAA-rated Residential Mortgage Backed Securities (RMBS). This is a further A$4 billion investment, taking the total Government support to RMBS since the financial crisis to A$20 billion.

The Government has tasked the Treasury to design bullet RMBS structures and will amend the Banking Act 1959 to allow Australian banks, credit unions and building societies to issue covered bonds. Full details of the Government’s announced banking reforms are available from the Treasury website: http://www. treasury. gov. au/banking/content/_downloads/competitive_and_sustainable_banking. pdf Australia’s Banking Industry > 19 Commercial Banking and Corporate Finance Scope Services to the commercial sector can be segregated into a number of core markets:31 › › Commercial Lending – Intermediated lending to SMEs, large corporates, institutions and government; › › ›

Corporate Finance and Advisory: Mergers and Acquisitions – M&A, demergers and other advisory; Equity Capital Markets – Initial public offerings (IPOs), secondary raisings, underwriting; and Debt Capital Markets – corporate, government and institutional bonds, structured finance – securitisation, syndicated loans and project finance. Australia’s commercial and corporate advisory sectors are known for specialised expertise in particular industries including energy, mining and resources, infrastructure and project finance, agriculture, and real estate. Market Participants Authorised Deposit-taking Institutions There are 56 banks licensed to service wholesale clients in Australia and a further 16 banks with representative offices. Nine foreign banks operate with a subsidiary license, and a further 35 as a foreign bank branch.

In addition, there is a growing number of emerging market banks that have entered Australia, particularly from China and India, primarily focused on servicing their corporate clients in Australia, as well as Australian companies interested in entering their markets. A list of authorised banking institutions in Australia is provided in Appendix A. 32 There has been a re-alignment of foreign bank operations in Australia following the global financial crisis – changes in Australia largely reflect outcomes of parent banks. Leading houses such as Citibank, Deutsche Bank, HSBC, JPMorgan, Royal Bank of Scotland, UBS, and others have a substantial commercial banking presence here. Boutique Advisory Firms and Securities Brokers Corporate advisory firms and small specialist finance companies provide competition in niche areas such as mergers and acquisitions advisory.

Included in this category are the larger accounting firms that have a corporate advisory arm, as well as a range of smaller specialist boutique firms, including: Moelis & Company, Palladio Partners, Gresham Partners, Caliburn Partnership and BKK Partners. Securities brokers or stockbrokers are generally categorised as either institutional or retail. Many of these firms provide auxiliary services in capital market financing. Specialised Finance Companies As in the consumer lending area, non-deposit-taking specialised finance companies provide an alternative source of financing for corporations and institutions. Such institutions include asset finance and leasing companies, vendor finance companies, factoring or inventory finance companies and specialised trade finance companies.

This sector was significantly affected by the financial crisis due to its dependence on wholesale markets and securitisation to fund its activities. In addition, the Australian operations of a number of foreign owned institutions were hit hard by effects in their home markets. 31. Many foreign banks providing commercial banking and corporate advisory services are also active in investment and asset management. This sector is covered in Austrade’s Investment Management Industry in Australia publication, 2010. http://www. austrade. gov. au/ArticleDocuments/2792/Investment-Management-Industry-in-Australia. pdf. aspx 32. Source: APRA website at http://www. apra. gov. au/ADI/ADIList. cfm Australia’s Banking Industry > 21 Commercial Lending

The level of total business loans outstanding from Australia’s financial institutions was in excess of A$620 billion as at October 2010. 33 Commercial Lending credit to the non-financial sector grew at a CAGR of 11. 1 per cent over the ten years to October 2010, with lending to the financial sector growing at 18. 8 per cent CAGR over the same period. Lending grew more rapidly in the early part of the decade and in 2007 and 2008 there was a market shift to intermediated lending as debt capital markets became more difficult to access. Since 2008, commercial lending has been in decline, subtracting 6. 6 per cent in 2009 and 2. 4 per cent in 2010.

Coinciding with this, equity capital markets saw a rise in secondary market issuance, with many companies choosing to increase the proportion of their capital funded from equity (see Equity Capital markets section). Australia’s Bank Commercial Lending – Finance and Non-Finance (Year End, A$ Billion, Excluding Securitisation) 800 700 600 500 A$ Billion Financial intermediaries (18. 8%) Non-financial sector (11. 1%) 400 300 200 100 0 Dec-2000 Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005 Year End Dec-2006 Dec-2007 Dec-2008 Dec-2009 Oct-2010 Note: The number in the brackets of the legends represents the compound annual growth rate since 2000. Sources: Reserve Bank of Australia, Statistical Table D5 Lending and Credit Aggregates (Last updated 30 Nov 2010); Austrade

The major domestic banks provide the bulk of commercial intermediated lending in Australia, which includes loans to large corporates, financial institutions, government organisations and SMEs. Regional banks, credit unions and building societies provide some additional competition in the smaller enterprise sector and niche areas such as rural and agricultural organisations. Similarly, leasing companies and other non-deposit taking finance companies provide specialised lending. As at February 2011, the major domestic banks account for 72 per cent34 of bank loans to non-financial corporations, while the other domestic banks account for 9 per cent and foreign banks 19 per cent.

Suncorp-Metway and Bendigo Adelaide Bank are the most significant competitors in the regional domestic banks, while the largest foreign bank competitors in non-financial commercial lending are Rabobank, Bank of Tokyo-Mitsubishi, ING and BNP Paribas. 35 33. Reserve Bank of Australia, Statistical Table D2, Lending and Credit Aggregates (last updated 30 November 2010). 34. Includes Bank of Western Australia, a wholly owned subsidiary of the Commonwealth Bank of Australia. 35. APRA, Monthly Banking Statistics, May 2010 (issued 30 June 2010). 22 > Australian Trade Commission Loans and Advances to Corporations on Australian Books of Individual Banks (A$ Million)

September 2010 National Australia Bank Ltd Australia and New Zealand Banking Group Ltd Westpac Banking Corporation Commonwealth Bank of Australia Four Major Domestic Banks Bank of Western Australia Ltd1 Suncorp-Metway Ltd Bendigo and Adelaide Bank Ltd Macquarie Bank Ltd Bank of Queensland Ltd Rural Bank Limited AMP Bank Limited Members Equity Bank Pty Ltd Total Other Domestic Banks Rabobank Australia Ltd ING Bank (Australia) Ltd HSBC Bank Australia Ltd Investec Bank (Australia) Ltd Bank of Cyprus Australia Ltd Arab Bank Australia Ltd Beirut Hellenic Bank Ltd Citigroup Pty Ltd Bank of China (Australia) Ltd Total Foreign-owned Bank Subsidiaries The Bank of Tokyo-Mitsubishi UFJ, Ltd BNP Paribas The Royal Bank of Scotland Plc Sumitomo Mitsui Banking Corporation Mizuho Corporate Bank, Ltd Bank of China Limited UBS AG ING Bank N. V. The Hongkong and Shanghai Banking Corporation Ltd Cooperatieve Centrale Raiffeisen-Boerenleenbank B. A. Top 10 Foreign-owned Bank Branches Other Foreign-owned Bank Branches Total Foreign-owned Bank Branches TOTAL Non-financial Corporations 92,370 71,747 63,476 56,673 284,265 23,313 17,360 7,933 4,147 5,297 3,572 583 51 62,256 11,001 3,287 3,097 2,357 842 526 405 31 0 21,547 6,728 5,921 4,214 4,661 3,856 4,131 1,696 2,687 2,181 2,574 38,649 18,099 56,748 424,816 Financial Corporations 9,936 7,410 10,668 12,674 40,689 698 397 76 1,253 0 0 5 19 2,448 0 0 99 0 0 63 0 131 0 293 347 200 981 398 687 121 1,361 0 436 0 4,530 4,517 9,047 52,477

Total 102,306 79,157 74,144 69,347 324,954 24,011 17,757 8,009 5,400 5,297 3,572 587 70 64,703 11,001 3,287 3,197 2,357 842 589 405 162 0 21,840 7,075 6,121 5,195 5,059 4,543 4,252 3,057 2,687 2,617 2,574 43,179 22,616 65,795 477,292 1. BankWest (Bank of Western Australia) is a wholly owned subsidiary of the Commonwealth Bank of Australia. Sources: Australian Prudential Regulation Authority, Monthly Banking Statistics, September 2010 (issued 29 October 2010), Table 2; Austrade Australia’s Banking Industry > 23 Over the past ten years, the fastest growing segment of commercial lending in Australia has been to larger corporations, borrowing over A$2 million. Loans to SMEs have grown more gradually during this period.

Australia’s Bank Lending To Business – Total Credit Outstanding by Size (A$ Billion) Under A$100,000 Jun-2000 Jun-2001 Jun-2002 Jun-2003 Jun-2004 Jun-2005 Jun-2006 Jun-2007 Jun-2008 Jun-2009 Jun-2010 Share % CAGR % 22. 6 22. 8 23. 7 24. 3 24. 8 24. 5 24. 1 23. 0 23. 7 25. 3 26. 0 4. 0 1. 4 $100 000 to < $500,000 44. 1 46. 3 50. 9 54. 3 60. 2 66. 4 70. 1 70. 8 75. 0 72. 6 67. 3 10. 2 4. 3 $500 000 to < $2 Million 39. 0 42. 0 45. 2 50. 2 57. 8 67. 6 76. 5 93. 3 101. 1 103. 3 101. 4 15. 4 10. 0 $2 Million and Over 151. 2 164. 7 164. 6 169. 7 196. 1 215. 6 268. 7 338. 0 449. 7 489. 9 464. 1 70. 4 11. 9 Total 256. 9 275. 8 284. 4 298. 6 338. 9 374. 1 439. 5 525. 1 649. 6 691. 0 658. 8 100. 0 9. 9

Sources: Reserve Bank of Australia, Statistical Table D7 Bank Lending To Business (Last updated 16 Sep 2010); Austrade Growth in lending by industry sector has varied considerably over the past 10 years. The fastest growing segments have been finance and insurance, wholesale and retail trade, transport, storage, agriculture and fishing. Australia’s Bank Lending To Business – Total Credit Outstanding by Sector (A$ Billion) Agriculture, Fishing, etc Jun-2000 Jun-2001 Jun-2002 Jun-2003 Jun-2004 Jun-2005 Jun-2006 Jun-2007 Jun-2008 Jun-2009 Jun-2010 Share % CAGR % 23. 2 25. 2 26. 8 29. 0 34. 1 39. 3 43. 5 47. 2 53. 7 57. 4 59. 3 9. 0 9. 8 Mining 7. 5 7. 5 7. 6. 1 5. 2 5. 7 6. 8 9. 4 11. 7 11. 5 15. 1 2. 3 7. 3 Manufacturing 30. 0 28. 7 28. 9 29. 2 31. 8 31. 3 37. 1 40. 8 44. 6 43. 7 39. 7 6. 0 2. 8 Wholesale Trade, Retail Trade & Transport Finance & Construction & Storage Insurance 13. 1 13. 6 12. 8 14. 4 17. 7 19. 4 21. 3 24. 8 30. 5 31. 5 28. 3 4. 3 8. 0 34. 3 35. 2 40. 7 43. 9 49. 3 54. 9 64. 2 74. 4 87. 2 93. 2 92. 9 14. 1 10. 5 39. 5 41. 9 43. 4 42. 7 47. 4 49. 6 62. 5 80. 5 123. 7 133. 1 126. 1 19. 1 12. 3 Other 109. 4 123. 8 124. 2 133. 2 153. 5 173. 9 204. 1 248. 0 298. 2 320. 6 297. 4 45. 1 10. 5 Total 256. 9 275. 8 284. 4 298. 6 338. 9 374. 1 439. 5 525. 1 649. 6 691. 0 658. 8 100. 0 9. 9

Sources: Reserve Bank of Australia, Statistical Table D7 Bank Lending To Business (Last updated 16 Sep 2010); Austrade 24 > Australian Trade Commission Syndicated Debt Global syndicated lending for the year to December 2010 totalled US$2. 7 trillion, up 49 per cent from the previous year. The energy and power sector was most active, with a market share of 21 per cent. Australian mandated loans rose by 42 per cent for this same period, with total proceeds of US$66 billion. Australia’s total syndicated loans represent around 2. 1 per cent of the global market. Industrials, energy, power and financials were the most active, with combined market share of 57 per cent of total syndicated loan proceeds (24 per cent, 17 per cent and 16 per cent respectively).

Other major sectors included materials (14 per cent), real estate (14 per cent) and telecommunications (9 per cent). 36 The four major banks are prominent in this market, in terms of both arrangers and bookrunners. 37 Significant foreign competitors include RBS, Mitsubishi, Sumitomo Mitsui, JP Morgan, Credit Agricole and HSBC. Australian Syndicated Loans Ranking Mandated Arranger ANZ Banking Group Westpac Banking Commonwealth Bank of Australia National Australia Bank RBS Mitsubishi UFJ Financial Group Sumitomo Mitsui Financial Group Inc JP Morgan Credit Agricole CIB HSBC Holdings PLC 2010 Rank 1 2 3 4 5 6 7 8 9 10 2009 Rank 1 3 2 4 7 9 10 18 8 12

Bookrunner ANZ Banking Group Westpac Banking Commonwealth Bank of Australia National Australia Bank RBS JP Morgan Bank of China Ltd Mitsubishi UFJ Financial Group Mizuho Financial Group HSBC Holdings PLC 2010 Rank 1 2 3 4 5 6 7 8 9 10 2009 Rank 3 1 4 2 6 16 14 9 7 18 Sources: Thomson Reuters, Global Syndicated Loans Review, Full Year 2010; Austrade On a five year total basis, Australian syndicated loan activity exceeded US$330 billion. Australian activity represents around 2. 1 per cent of the world market and around 13 per cent of the Asia-Pacific region. 36. Thomson Reuters, Global Syndicated Loans Review, Full Year 2010. 37. Bookrunner is the main underwriter to the issue. Australia’s Banking Industry > 25 Worldwide Syndicated Loans 010 2009 2008 2007 2006 2006-2010 Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % Global By country USA Japan UK Germany France Canada Australia Taiwan UAE Hong Kong Singapore Brazil Mexico New Zealand Malaysia By Region Americas Europe Africa/Middle East 1,222. 3 818. 3 67. 6 45. 0 30. 1 2. 5 694. 4 608. 5 470. 9 56. 1 37. 9 33. 3 25. 7 3. 1 1,205. 4 784. 7 533. 6 100. 3 45. 9 29. 9 20. 3 3. 8 2,339. 0 1,633. 6 505. 5 139. 9 50. 6 35. 4 10. 9 3. 0 1,925. 9 1,481. 2 470. 0 104. 6 48. 4 37. 2 11. 8 2. 6 7,386. 9 5,326. 4 2,590. 4 468. 5 46. 8 33. 8 16. 4 3. 0 1,089. 0 252. 1 190. 9 96. 3 129. 2 110. 1 66. 0 55. 6 16. 4 41. 1 22. 8 7. 8 9. 9 8. 6 11. 1 40. 1 9. 3 7. 0 3. 5 4. 8 4. 0 2. 4 2. 0 0. 6 1. 5 0. 8 0. 3 0. 0. 3 0. 4 579. 2 249. 2 82. 8 104. 2 89. 7 71. 3 46. 4 22. 1 22. 1 18. 4 16. 5 15. 0 24. 8 5. 9 3. 8 31. 7 13. 6 4. 5 5. 7 4. 9 3. 9 2. 5 1. 2 1. 2 1. 0 0. 9 0. 8 1. 4 0. 3 0. 2 1,036. 2 289. 7 196. 7 84. 7 119. 1 123. 1 52. 7 31. 1 45. 7 10. 8 35. 2 13. 9 6. 3 7. 0 5. 4 39. 5 11. 0 7. 5 3. 2 4. 5 4. 7 2. 0 1. 2 1. 7 0. 4 1. 3 0. 5 0. 2 0. 3 0. 2 2,136. 2 208. 4 389. 8 231. 9 255. 0 137. 3 100. 3 29. 1 45. 0 20. 7 14. 1 25. 3 20. 1 6. 5 10. 8 46. 3 4. 5 8. 4 5. 0 5. 5 3. 0 2. 2 0. 6 1. 0 0. 4 0. 3 0. 5 0. 4 0. 1 0. 2 1,735. 4 216. 3 314. 1 303. 1 226. 5 118. 5 70. 9 29. 1 33. 8 31. 7 19. 7 33. 6 19. 4 11. 4 7. 2 43. 6 5. 4 7. 9 7. 6 5. 7 3. 1. 8 0. 7 0. 8 0. 8 0. 5 0. 8 0. 5 0. 3 0. 2 6,576. 1 1,215. 6 1,174. 3 820. 1 819. 5 560. 4 336. 3 166. 9 163. 0 122. 7 108. 2 95. 6 80. 5 39. 4 38. 3 41. 7 7. 7 7. 4 5. 2 5. 2 3. 6 2. 1 1. 1 1. 0 0. 8 0. 7 0. 6 0. 5 0. 2 0. 2 2,718. 7 100. 0 1,829. 9 100. 0 2,624. 0 100. 0 4,617. 9 100. 0 3,981. 7 100. 0 15,772. 2 100. 0 Asia-Pacific/Central Asia610. 5 22. 5 Sources: Thomson Reuters Global Syndicated Loans Review, Full Year 2010, Syndicated Loans Review, Fourth Quarters of 2009, 2008 and 2007; Austrade Project and Infrastructure Finance The global project finance market showed a significant rebound in 2010, with 587 deals valued at US$206. billion. This represented an expansion in total loans of 44. 4 per cent compared to the previous year. According to the latest survey of Reuters Thomson, each region saw an increase in deal activity: Americas increased 24. 6 per cent, Europe/Middle East/Africa (EMEA) increased 28. 3 per cent and Asia Pacific, with the largest rise, increased 69. 8 per cent. The Asia Pacific (including Japan) accounted for 47. 2 per cent of global activity (US$97. 5 billion). This increased from a global share of 40. 2 per cent in 2009 (US$57. 4 billion). Australia has remained the second most active market in the region, behind India, with 32 deals valued at US$14. billion38, which accounted for 15 per cent of the region’s total. Australia’s four major banks all ranked within the top 20 mandated arrangers for the Asia Pacific in 2010. 39 Infrastructure is one of the most significant areas for project financing and Australia is widely recognised as a global leader and innovator in infrastructure financing. The nation has a long history of engagement in the infrastructure sector, beginning with the privatisations of the late 1980s and 1990s that has resulted in extensive experience with private infrastructure financing and public-private partnerships (PPPs). 38. Thomson Reuters, Project Finance Review, Full Year 2010. 39. Ibid. 26 > Australian Trade Commission

Australian expertise extends across the full spectrum of economic and social infrastructure including toll roads, airports, railway rolling stock and terminals, broadcast communications, power generators, gas and electricity transmission and distribution, shipping ports, water utilities, schools, hospitals, aged care facilities and public housing. The Australian infrastructure market is among the most sophisticated markets in the world with estimated A$9 billion in infrastructure construction projects work contracted annually. In the 2009-10 Budget, the Australian Government committed A$22 billion to improve the nation’s infrastructure in transport, communications, energy, education and health sectors as part of the ‘Building Australia Fund’. In addition, State Governments have committed an estimated A$2. billion to infrastructure projects. 40 Infrastructure needs and priorities for Australia are laid out by Infrastructure Australia. Appendix F provides an overview of priority projects as at June 2010. The value of these projects totals almost A$83 billion. 41 Infrastructure Australia’s Investment Priorities Stage Definition Total Cost Estimates (A$ Million) 19,634 Early Stage Initiatives address a nationally significant issue or problem, but the identification or development of the right solution is at an early stage. Initiatives clearly address a nationally significant issue or problem and, there has been a considerable amount of analysis of potential solutions.

Initiatives have strong strategic and economic merit, and are only not ready to proceed due to a small number of outstanding issues. Initiatives meet all of Infrastructure Australia’s criteria. Real Potential Threshold Ready to proceed 41,522 10,123 11,566 Source: Infrastructure Australia, ‘Getting the fundamentals right for Australia’s infrastructure priorities’, June 2010 http://www. infrastructureaustralia. gov. au/publications/files/Report_to_COAG_ 2010. pdf Infrastructure Australia Infrastructure Australia (IA) was established in 2008 to coordinate a national approach to Australia’s future infrastructure needs. The agency plays an advisory role to governments, investors and owners of infrastructure concerning: › › › › ›

Significant national infrastructure priorities and initiatives; Recommendations for policy and regulatory reforms to drive better efficiencies in the utilisation of national infrastructure networks; Options to address hindrances to the development and provision of efficient national infrastructure; Infrastructure needs of the Australian public; and Possible financing mechanisms. More information on Infrastructure Australia and its policies and guidelines is available at: www. infrastructureaustralia. gov. au In addition to public sector infrastructure projects, Australia is currently undergoing significant investment in private sector projects that will increase the output of Australia’s mineral and energy sectors. Infrastructure projects directly associated with the minerals and energy sector currently stand at 15, with an estimated cost of A$11. 0 billion in committed projects, and a further 31 valued at A$27. 8 billion in less advanced projects. 2 Committed infrastructure projects include iron ore and coal ports, rail projects and gas pipelines. Appendix G outlines the future capital expenditure commitments within Australia’s minerals and energy sectors. 40. KPMG, Federal Budget 2009-10 national infrastructure spending priorities June 2009. 41. Infrastructure Australia, Getting the Fundamentals Right for Australia’s Infrastructure Priorities, June 2010. 42. ABARE-BRS, Minerals and energy Major development projects report, October 2010. Australia’s Banking Industry > 27 Trade Finance Australia has an open, diversified economy that is actively engaged in international trade and has increasingly exported goods and services to the fast growing Asian region.

In 2010, Australia exported A$231 billion in merchandise trade, having grown at 7. 7 per cent CAGR since the year 2000. The majority of Australia’s exports are natural resources and primary products and account for around 70 per cent of Australia’s total merchandise exports. Australia’s Merchandise Exports, FOB Value (A$ Billion) 2000 Crude Materials, Inedible, except Fuels Metalliferous Ores & Metal Scrap Mineral Fuels & Related Materials Coal, Coke & Briquettes Petroleum & Related Materials Gas, Natural & Manufactured Manufactures Food & Beverage & Tobacco & Live Animals Other 1 2002 22. 0 13. 9 24. 7 12. 9 8. 6 3. 2 37. 2 24. 1 11. 5 119 2004 23. 1 16. 3 23. 8 13. 5 7. 1 3. 3 33. 9 23. 7 13. 2 118 2006 39. 2 32. 39. 3 23. 4 9. 8 6. 2 42. 0 23. 4 19. 9 164 2008 56. 3 50. 0 71. 1 46. 9 13. 8 10. 4 47. 1 25. 2 22. 7 222 2010  75. 6 68. 9 66. 6 43. 1 12. 9 10. 5 40. 4 23. 7 24. 5 231 2010 % Share 32. 8 29. 9 28. 8 18. 7 5. 6 4. 6 17. 5 10. 3 10. 6 100 CAGR % 2000/2010 13. 5 17. 8 11. 2 16. 5 2. 1 12. 6 1. 5 1. 2 9. 3 7. 7 21. 2 13. 4 23. 0 9. 3 10. 5 3. 2 34. 9 21. 0 10. 1 110 TOTAL 1. Commodities not classified elsewhere in the Standard International Trade Classification. CAGR = Compound Annual Growth Rate. Sources: Australian Bureau of Statistics Cat No. 5368. 0 International Trade in Goods and Services, Australia, Table 12a. Merchandise Exports; Austrade

Over the past ten years, Australian exports to Asia have grown more rapidly than other regions. Four of Australia’s top five country export destinations are now based in Asia. Exports – 2010 (% Share) Middle East 2. 9% Oceania 4. 9% Americas 6. 1% Africa 1. 6% Imports – 2010 (% Share) Middle East 2. 2% Oceania 5. 3% Africa 1. 6% Americas 14. 3% South Asia 7. 8% South Asia 1. 2% Europe 9. 1% East Asia 67. 9% Europe 20. 9% East Asia 54. 6% Sources: Department of Foreign Affairs and Trade, Monthly Trade Data Dec 2010, Table 3; Austrade Sources: Department of Foreign Affairs and Trade, Monthly Trade Data Dec 2010, Table 4; Austrade 28 > Australian Trade Commission Australia’s Merchandise Exports by Country, FOB Value (A$ Billion) 000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 China Japan South Korea India USA Taiwan UK New Zealand Thailand Singapore Indonesia Malaysia Hong Kong Netherland UAE Papua New Guinea Germany South Africa Saudi Arabia Brazil Other Markets TOTAL CAGR = Compound Annual Growth Rate. 2002 8. 4 22. 2 10. 0 2. 5 11. 5 4. 7 5. 6 7. 9 2. 5 5. 0 3. 1 2. 3 3. 5 1. 4 1. 3 1. 0 1. 6 1. 3 2. 4 0. 4 20. 8 119 2004 11. 0 22. 2 9. 2 5. 4 9. 5 4. 1 5. 1 8. 8 3. 1 3. 3 3. 2 2. 4 2. 7 1. 5 1. 3 0. 9 1. 3 1. 6 2. 0 0. 6 18. 4 118 2006 20. 4 32. 4 12. 4 8. 8 10. 1 6. 3 8. 1 8. 9 4. 3 4. 6 4. 4 2. 8 3. 2 2. 8 2. 0 1. 5 1. 4 2. 3 2. 2 0. 9 24. 0 164 2008 32. 3 50. 8 18. 4 13. 5 12. 1 8. 3 9. 3 9. 3 5. 3 6. 1 4. 3 4. 0 3. 0 3. 6 3. 9 1. 2. 1 2. 5 2. 5 1. 6 27. 7 222 2010  58. 3 43. 6 20. 4 16. 4 9. 3 8. 4 8. 3 8. 0 5. 8 4. 8 4. 5 3. 6 3. 2 2. 6 2. 1 2. 0 1. 8 1. 8 1. 6 1. 6 22. 6 231 2010 % Share 25. 3 18. 9 8. 8 7. 1 4. 0 3. 6 3. 6 3. 5 2. 5 2. 1 1. 9 1. 6 1. 4 1. 1 0. 9 0. 9 0. 8 0. 8 0. 7 0. 7 9. 8 100 CAGR % 2000/2010 25. 5 7. 2 8. 5 24. 5 -1. 7 4. 2 8. 3 2. 0 11. 6 -1. 9 4. 5 4. 4 -1. 2 3. 9 7. 8 7. 5 3. 4 3. 6 -0. 1 10. 6 1. 5 7. 7 6. 0 21. 8 9. 0 1. 8 11. 0 5. 6 3. 8 6. 6 2. 0 5. 9 2. 9 2. 4 3. 6 1. 8 1. 0 1. 0 1. 3 1. 3 1. 6 0. 6 19. 5 110 Sources: Australian Bureau of Statistics Cat No. 5368. 0 International Trade in Goods and Services, Australia, Table 14a; Austrade

In addition to merchandise trade, Australia exported A$53 billion worth of services in the fiscal year 2009-10, with travel (including business and personal education-related services) contributing A$33. 4 billion, or over 60 per cent of Australia’s services exports. The Australian Government also assists Australian businesses with trade finance solutions through the Export Finance & Insurance Corporation (EFIC). In fiscal year 2010, EFIC provided financing facilities totalling A$971. 3 million that supported export contracts and overseas investments of over A$5. 9 billion. 43 Export Finance Navigator for SMEs lists the following banks with specialist trade finance teams44 in Australia: › › › › › › ›

Australia and New Zealand Bank Bank of Queensland Bendigo Bank Commonwealth Bank of Australia HSBC National Australia Bank Westpac 43. Export Finance & Insurance Corporation (EFIC) http://www. efic. gov. au/Pages/homepage. aspx 44. Export Finance Navigator http://www. exportfinance. gov. au/Pages/Preparingforexport. aspx Australia’s Banking Industry > 29 Corporate Finance and Advisory Mergers and Acquisitions Mergers and Acquisitions (M&A) activity improved in 2010 as the world economy recovered from the global financial crisis, according to the Thomson Reuters’ Full Year 2010 M&A Financial Advisory Review. The value of global-announced M&A totalled US$2. 4 trillion in 2010, up 22. 9 per cent from 2009.

Australia’s M&A announced value reached US$132 billion in 2010, a 140 per cent increase from 2009. The rebound in Australia’s M&A activity last year was largely driven by the mining, financial, energy and telecommunications sectors. In the Asia-Pacific region M&A activity is heavily concentrated in the top three economies (Australia, China and Japan). Together, their announced deals were worth around US$347 billion—accounting for more than 60 per cent of the region’s total. Of the top ten financial advisors in Australia, based on completed M&A by imputed fees, nine are foreign-based global investment houses and one is the Australia-based Macquarie Group.

They together generated US$648 million in imputed fees in 2010, accounting for 43 per cent of Australia’s M&A advisory fees. On a five-year total basis, Australian M&A activity has been significant with announced deals totalling US$528 billion. The total value of the Australian deals was the largest in the Asia-Pacific region. Australian activity represents around 3. 5 per cent of global deal flow and more than one-fifth of that of the Asia-Pacific region. Australia has a vibrant Private Equity (PE) market, raising A$17 billion over the five years to June 2010. International and domestic PE leveraged buyouts continue to contribute significantly to M&A activities. The largest PE deal for 2010 was the A$2. billion45 buyout of Australia’s second largest private hospital owner and pathology provider, Healthscope. Worldwide Announced Mergers & Acquisitions – Financial Advisors 2010 Rank Market Value Share US$Bn % Worldwide Americas USA Brazil Canada Europe UK Asia-Pacific Australia Japan China Africa/Middle East 2,434. 2 1,136. 3 821. 6 104. 2 99. 6 641. 0 162. 9 565. 9 131. 7 83. 9 131. 1 91. 0 100. 0 46. 7 33. 8 4. 3 4. 1 26. 3 6. 7 23. 2 5. 4 3. 4 5. 4 3. 7 2009 Rank Market Value Share US$Bn % 1,980. 3 921. 7 719. 4 65. 4 95. 9 581. 0 160. 0 428. 4 54. 8 104. 9 108. 7 49. 3 100. 0 46. 5 36. 3 3. 3 4. 8 29. 3 8. 1 21. 6 2. 8 5. 3 5. 5 2. 5 2008 Rank Market Value Share US$Bn % 2,887. 0 1,156. 4 923. 8 93. 1 85. 1,168. 7 269. 0 512. 2 90. 2 77. 0 113. 6 49. 7 100. 0 40. 1 32. 0 3. 2 3. 0 40. 5 9. 3 17. 7 3. 1 2. 7 3. 9 1. 7 2007 Rank Market Value Share US$Bn % 4,169. 1 1,890. 4 1,570. 8 46. 0 197. 6 1,592. 6 387. 1 596. 6 136. 5 136. 4 75. 4 89. 5 100. 0 45. 3 37. 7 1. 1 4. 7 38. 2 9. 3 14. 3 3. 3 3. 3 1. 8 2. 1 2006 Rank Market Value Share US$Bn % 3,609. 9 1,762. 9 1,475. 2 33. 6 162. 1 1,325. 2 333. 8 458. 5 114. 5 101. 3 46. 7 63. 4 100. 0 48. 8 40. 9 0. 9 4. 5 36. 7 9. 2 12. 7 3. 2 2. 8 1. 3 1. 8 2006-2010 Rank Market Value Share US$Bn % 15,080. 6 6,867. 7 5,510. 8 342. 2 640. 8 5,308. 4 1,312. 8 2,561. 5 527. 7 503. 4 475. 6 342. 9 100. 0 45. 5 36. 2. 3 4. 2 35. 2 8. 7 17. 0 3. 5 3. 3 3. 2 2. 3 Sources: Thomson Reuters Mergers & Acquisitions Financial Advisors, Full Year 2010, Fourth Quarter 2009, Fourth Quarter 2008 and Fourth Quarter 2007; Austrade Equity Capital Markets Australia has a large and liquid equities market. During the financial crisis in 2008-09, Australia’s equity capital market provided support for corporations seeking capital off-setting, in part, the disruption experienced in international debt markets. Total equity market raisings46 increased by 7. 5 per cent during this period with secondary market raisings rising 74 per cent from A$50. 6 billion to A$88. 1 billion.

Many companies raised equity through rights issues and placements to strengthen their balance sheets and meet the short fall from debt markets at this time. 45. Enterprise Value at time of announced deal, 19th July 2010. 46. Includes Rights Issues, placements, calls on contributing shares, exercise of options, employee share schemes, DRPs, SPPs. 30 > Australian Trade Commission New Capital Raisings for Cash in Australia (A$ Million) Survey Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR % Primary Raisings IPOs Privatisations 6,939 8,519 2,857 5,961 12,753 14,883 23,108 19,694 11,003 1,885 11,459 5. 9,706 6,400 200 0 0 0 0 8,679 0 0 0 – Secondary Raisings Rights Issues Placements 4,587 549 992 2,446 8,753 3,242 2,468 13,001 12,449 28,506 23,182 17. 6 9,024 4,293 5,310 7,032 7,640 7,896 12,817 19,789 20,920 38,235 23,118 9. 9 Other1 6,613 5,748 6,758 7,608 9,487 11,125 13,041 16,742 17,271 21,338 18,785 11. 0 Total 36,869 25,509 16,117 23,047 38,633 37,146 51,434 77,905 61,643 89,964 76,544 7. 6 % of Average Market Capitalisation 5. 9 3. 7 2. 2 3. 4 5. 0 4. 1 4. 7 5. 6 4. 3 7. 5 5. 6 – 1. Other includes Calls on Contributing Shares, Exercise of Options, Employee Share Schemes, Dividend Reinvestment, Prospectus, SPP. Sources: AFMA Australian Financial Markets Report; Austrade

With 2,072 listed companies, the Australian stock market is the second largest free-floating stock market in Asia-Pacific after Japan at US$1,148 billion. Size of Key Stock Markets in the Asia-Pacific Region Market Capitalisation of Floating Captals (US$ Billion, 31 Dec 2010) 1,400 1,200 1,148 USA Japan UK Canada France Germany 718 638 14,187 2,856 2,675 1,578 1,160 999 1,000 US$ Billion 806 800 600 472 446 400 245 200 125 110 84 38 0 20 Australia China South Korea Taiwan Hong Kong India Singapore Malaysia Indonesia Thailand Philippines New Zealand Sources: Standard & Poor’s, Global Broad Market Index, Dec 2010; Austrade Australia’s Banking Industry > 31

Corporate advisory services are provided by way of arranging and underwriting new equity securities for domestically domiciled corporations from the private and public sectors. A large portion of equity is raised in the secondary market through rights issues (or entitlement offers) and institutional placements. Over the past three years, secondary market issuance far exceeded primary market issuance as listed companies recapitalised and paid down debt. Commentators expect primary issuance to increase as the market outlook improves. Over the five years, Australia’s equity capital market raised almost US$200 billion, representing 5. 1 per cent of the global equity raisings of US$3. 9 trillion. Global Equity Capital Markets – Equity and Equity-Related1 010 2009 2008 2007 2006 2006-2010 Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market Proceeds Market (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % (US$Bn) Share % USA Europe, Middle East & Africa2 200. 9 179. 6 23. 5 21. 0 35. 9 6. 8 3. 4 6. 0 249. 1 268. 7 165. 7 64. 3 58. 9 30. 5 872. 7 28. 5 30. 8 19. 0 7. 4 6. 8 3. 5 238. 2 214. 8 79. 0 15. 1 40. 1 24. 2 631. 3 37. 7 34. 0 12. 5 2. 4 6. 4 3. 8 227. 1 345. 2 159. 5 25. 4 36. 7 49. 4 815. 5 27. 8 42. 3 19. 6 3. 1 4. 5 6. 1 208. 1 228. 9 141. 9 68. 0 34. 5 17. 8 719. 5 28. 9 31. 8 19. 7 9. 5 4. 8 2. 5 1,123. 4 1,237. 2 852. 7 231. 1 199. 4 173. 5 3,893. 1 28. 9 31. 8 21. 9 5. 9 5. 1 4. 5 Asia Pacific 306. (ex Japan & Australia) Japan Australia Latin America Global Total 2 58. 3 29. 1 51. 6 854. 2 1. Including Intial Public Offerings, Secondary Offerings and Convertible Offerings. 2. The regional total for Europe, Middle East & Africa in 2007 include Rights Offers that are not included in other regional sub-totals or the Global total. Sources: Thomson Reuters Global Equity Capital Markets, Full Year 2010, Fourth Quarter 2009, Fourth Quarter 2008 and Fourth Quarter 2007; Austrade All ten of the world’s largest arrangers operates in the Australian equity capital markets. In 2010, A$29. 1 billion equity was raised with estimated imputed fees of A$756 million. 47 Australian Equity Capital Markets

Jan 1 2010 – Dec 31 2010 Bookrunner UBS Bank of America Merrill Lynch Credit Suisse RBS JP Morgan Goldman Sachs & Co Macquarie Group Morgan Stanley Citi Deutsche Bank AG Top Ten Total Industry Total 2010 Rank 1 2 3 4 5 6 7 8 9 10 Proceeds per Bookrunner (A$Mn) Market Proceeds Share (%) 8,366 3,088 2,393 2,179 2,154 2,144 1,694 1,455 1,094 1,077 25,643 32,056 26. 1 9. 6 7. 5 6. 8 6. 7 6. 7 5. 3 4. 5 3. 4 3. 4 80. 0 100. 0 Imputed Fees (A$Mn) Manager Market Fees Share (%) 144. 8 46. 8 37. 6 56. 1 42. 0 37. 2 49. 1 27. 2 19. 1 22. 5 482. 4 755. 7 19. 2 6. 2 5. 0 7. 4 5. 6 4. 9 6. 5 3. 6 2. 5 3. 0 63. 8 100. 0 Sources: Thomson Reuters, Equity Capital Markets Review, Full Year 2010, Australian Equity Capital Markets; Austrade 47.

Thomson Reuters, Equity Capital Markets Review, Full Year 2010. 32 > Australian Trade Commission The Government is progressing towards the introduction of competition to exchange markets in Australia. On 1 August 2010, market supervision for local exchanges transferred to the Australian Securities and Investment Commission (ASIC) and in April 2011, ASIC published new market integrity rules to provide the framework for the introduction of competition in equity exchange markets. These rules are expected to begin on 31 October 2011. 48 On 4 May 2011, the Government granted a licence to Chi-X Australia Pty Ltd as an alternative securities exchange.

In a joint media release, the Treasurer and Assistant Treasurer said “Competition in Australia’s financial markets is critical to promoting exchange innovation, lowering transaction costs for market participants, leveraging our pool of national superannuation savings, and improving liquidity and access to capital for companies”. 49 Debt Capital Markets Debt capital markets include the issuance of bonds by Australian governments and non-government institutions, asset-backed securities and Kangaroo bonds (bonds issued in Australian dollars by non-residents). Australia has US$1. 4 trillion debt securities outstanding – the region’s third largest amount after Japan and China.

Australian governments and business issue in both domestic and international markets. Domestic debt market issuance totalled A$116. 6 billion50 in 2010 with A$70. 3 billion51 issued through offshore markets – namely the US, Europe and Japan. International and Domestic Debt Securities – Amount Outstanding Residence of Issuer (US$ Billion, June 2010) 3,500 Domestic Securities 24 2843 International Securities 3,000 2,500 US$ Billion 2,000 1,500 531 126 1049 845 30 655 26 5 225 8 201 50 117 51 115 23 106 1,000 USA Japan UK France Germany Italy Canada 25,081 12,457 1,550 2,850 2,411 3,192 1,336 6,177 168 3,500 1,694 1,901 1,001 592 500 0 205 37 58 9 32 China Australia South Korea India Malaysia Taiwan Thailand Hong Kong

Singapore Indonesia Philippines New Zealand Sources: Bank for International Settlements, Quarterly Review, Dec 2010, Tables 11 and 16A; Austrade Over the decade to June 2010, non-government debt outstanding more than tripled from around A$400 billion to A$1. 3 trillion. Non-government debt securities were more than four times the government debt securities outstanding with the local financial institutions being the largest issuers in these markets. 48. Australian Securities and Investment Commission ‘10-151MR ASIC ready for market supervision’ http://www. asic. gov. au/asic/asic. nsf/byheadline/10-151MR+ASIC+rea dy+for+market+supervision? openDocument.

ASIC ’11-87MR ASIC publishes final competition market integrity rules’ 29 April 2011 http://144. 140. 79. 138/asic/asic. nsf/ byheadline/11-87MR+ASIC+publishes+final+competition+market+integrity+rules? openDocument 49. Australian Government Treasury ‘Government approves new financial markets competitor’ 4 May 2011 http://ministers. treasury. gov. au/DisplayDocs. aspx? doc=pressreleases/2011/067. htm&pageID=003&min=brs&Year=&DocType 50. Includes public domestic non-government bonds (including Kangaroo bonds), semi-government bonds and asset backed securities. Does not include The Commonwealth Government of Australia’s bonds that had gross bond issuance of A$58. 4 billion in the year to June 2010. See the AOFM Annual

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