Australia Introduces Plan to Increase Competition Within Banking Industry

Australia plans to strengthen credit unions and a ban on homeowners facing charges in exchange for mortgage providers, as the government responds to public pressure to reduce the prevalence of the four largest lenders in the country.

The changes are aimed at enhancing competition, maintain the lowest interest rates in time and ensure that "the Australians get a fair go," Treasurer Wayne Swan said in Canberra today.

A new "pillar" is built into the banking system by supporting credit unions and building societies that have lost market share since the financial crisis, Swan said. Australia will scrap exit fees on new mortgage loans in July, giving customers greater flexibility to change lender and expand the powers of the competition regulator of the nation, he said.

Commonwealth Bank of Australia, Westpac Banking Corp., National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. control more than 80 percent of domestic loans. Swan, whose government has no majority in parliament, is trying to appease a public outraged by increases in mortgage rates from banks last month that went beyond increasing the central bank's benchmark, even after it reported earnings record.

"The first aspect is to empower consumers to give them the ability to shop around, but also to help smaller lenders to compete with larger banks and to ensure that credit flows to Australian families and Australian businesses "said Swan.

Slow growth

Australia's largest banks are already facing slower loan growth, a worldwide review of banking regulations, capital requirements more onerous and expensive in the markets for debt financing. country's major banks are the "four pillars", after a law to prevent acquisitions among them.

The government said it intends to give the Competition and Consumer Commission the power to act against banks if they send price signals to each other to keep interest rates higher than they would be.

"The ACCC has advised me to believe cases have occurred in banking price signaling," Swan said today. "The only responsible to do is move in this direction and give the ACCC the powers it needs."

Australia A will make a new investment of $ 4 billion (3900 million dollars) to support the market for residential mortgage-backed securities that many of the smaller lenders in the nation based on making loans cheaper, the statement said.

The government also aims to enable all banks, credit unions and building societies to issue bonds to expand access to cheaper funding, more stable, said the treasurer. The government launched a project to amend the banking laws in 2011.

Market power

Swan has to be seen to do something to tackle the four big banks, "said Frank Zumbo, a professor of competition in the Australian School of Business in Sydney. "While credit unions and building societies are an alternative, have a long way to go to gain a foothold in the market power of the big four banks."

Banks accounted for 91 percent of new residential housing loans in September, according the Australian Bureau of Statistics. That's up from 81 percent in the same month three years ago, before the peak of the global financial crisis.

Among them, the four largest banks control almost 90 percent of residential mortgages sold by all banks, and write 83 percent of all loans, according to October data from the Australian Prudential Regulation Authority .

Commonwealth Bank, Australia's largest bank, urged caution in recommending other changes in regulations. The industry is already competitive, said in a presentation to a Senate investigation into banking competition.

Earnings Assets

CEO Ralph Norris said in the document of 03 December that the size of bank profits was often taken out of context of the total assets needed to achieve that performance.

Westpac, the second largest lender in Australia, last week published his presentation, calling the government to introduce measures to reduce the dependence of the leading banks in offshore funds, which have become more expensive since the financial crisis. The largest banks to blame for price increases cost of mortgages.

Credit unions and building societies say the country needs more competition and have asked the government to introduce policies to help access funding. In a November 30 submission to the Senate inquiry, the Association of Banks and Credit Unions requested the introduction of a flat rate guarantee of debt financing in bulk to smaller lenders.