Australian Treasurer Wayne Swan suggested the creation of a "fifth pillar" of credit unions to encourage competition in the banking sector in response to pressure to reduce the prevalence of the four largest lenders in the country.
"I am a believer in the fundamental importance of a market economy," Swan said in Canberra yesterday to announce a package of changes. "It provides flexibility and strength. But in a market economy, businesses and, of course, Australian families to be able to get a fair go in the banking system."
The government will strengthen credit unions and building societies that have lost market share since the financial crisis and the prohibition of the owners of "out" against the origination fee in exchange for mortgage providers for new loans from July, Swan said. It also plans to give customers greater flexibility to change lender and expanding the powers of regulatory competition in the nation.
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.
"I made it clear then, and I make it clear now, there was absolutely no justification for any bank to raise interest rates above the increases in the cash rate," 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 Australian banks have become political footballs, led analysts at UBS AG in Sydney by Jonathan Mott wrote last month. "The political debate surrounding the regulation and competition is now a major driver of performance of banks profitability."
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," said Swan. "The only responsible to do is move in this direction and give the ACCC the powers it needs."
Government Investment
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 Australian Bureau of current financial management program is U.S. $ 16 billion.
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 will release the draft amendments to banking laws in 2011.
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 .
Senate investigation
The public debate on competition in financial services is increasing as key figures in the industry to contribute to a Senate investigation. Central Bank governor Glenn Stevens is due to appear before the committee on 13 December.
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.
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.
Borrowing costs
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.
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