10.3 Financial institutions
The major participants in financial markets are:
- Banks - Investment banks
- Finance and life insurance companies
- Superannuation funds
- Unit trusts (mutual funds)
- Companies
- Australian Securities Exchange
Banks
Banks are the major operators in financial markets and are the most important source of funds for businesses
Banks receive savings as deposits from individuals, businesses and governments, and, in turn, make investments and loans to borrowers
Most of the funds provided through financial markets come from banks that operate on their own behalf or on behalf of other corporations, although other financial institutions also operate in the financial market.
Banks are the largest form of financial institution in Australia, although their share has declined as the financial markets have become deregulated
Banks perform an increasingly wide range of roles rather than specializing in one area, and have subsidiaries in superannuation and mutual, and other funds.
The Reserve Bank of Australia supervises banks
Investment banks
Investment banks make up one of the fastest growing sectors in the Australian financial system, providing services in both borrowing and lending to the business sector. Investment banks:
Trade in money, securities and financial futures
Arrange long-term finance for company expansion
Provide working capital
Arrange project finance
Advise clients on foreign exchange cover
Advise on mergers and takeovers
Provide portfolio investment management services
Underwrite corporate and semi-government issues of securities
Operate unit trusts including cash management trusts, property trusts and 
equity trusts
Arrange overseas finance

Finance and life insurance companies
Finance and life insurance companies are non-bank financial agents that specialize in smaller commercial finance
The Australian Prudential Regulation Authority (APRA) regulates these companies.
Finance companies act primarily as intermediaries in financial markets. They provide loans to businesses and individuals through consumer hire-purchase loans, personal loans and secured loans to businesses. They are also the major providers of lease finance to businesses. Some finance companies specialise in factoring or cash flow financing.
Finance companies raise capital through share issues (debentures). Debentures are for a fixed term and carry a fixed rate of interest. Lenders have the security of priority over the firm’s assets in the event of liquidation. In other words, the finance company is entitled to sell the assets of the business to recover the initial loan if the business fails.
Insurance companies provide loans to the corporate sector through receipts of insurance premiums, which provide funds for investment. They provide large amounts of both equity and loan capital to businesses. Insurance can be general insurance (covering property or accident) or life insurance. The funds received in premiums, called reserves, are invested in financial assets. The premiums paid by investors provide for compensation should something adverse happen, such as injury or death, or for savings for future needs.

Superannuation funds
Due to tax incentives and compulsory superannuation, superannuation funds have grown rapidly in Australia over the past 20 years
These organizations provide funds to the business sector through investment of funds received from superannuation contributions
Superannuation funds are able to invest in long-term securities as company shares, government and company debt because of the long-term nature of their funds.

Unit trusts
Unit trusts (also known as mutual funds) take funds from small investors and invest them in specific types of financial assets
Unit trusts investments