HomeView 2013 Media ReleasesTarget banking levy at real problem, not depositors

The Customer Owned Banking Association says the Government's Financial Stability Fund (FSF) levy should target the four major banks rather than depositors.

Commenting after the release of the economic statement from the Treasurer, COBA spokesman Mark Degotardi said:

"We note the Treasurer's comments about the need to consult with our sector to ensure these changes have no anti-competitive effect.

"This can be achieved by addressing the problem identified by the International Monetary Fund (IMF) which is Australia's highly concentrated banking market dominated by four large banks.

"Focusing the levy on the major banks will address their domestic systemic importance, where the IMF found the big 4 enjoy an effective taxpayer funded advantage due to their "too big to fail status".

"For a levy to be fair it must address this implicit guarantee enjoyed by the big 4."

The IMF's Assessment found that "The major banks enjoy implicit government support because of their systemic importance. As a result of their systemic importance, rating agencies reflect implicit government support in their ratings of major banks, which gives them a funding cost advantage. This funding cost advantage rose from 80 basis points to 120 basis points during the GFC, when government support for the banking system was made more explicit.

"Focusing the levy on the major banks means the levy is a prudent risk-management tool rather than a tax on depositors," Mr Degotardi added.

"If smaller ADIs such as credit unions, building societies, mutual banks and regional banks don't have to pay the levy, it will be harder for the big four banks to pass the levy on to depositors. It would be a pro-competitive measure rather than an anti-competitive measure."

In summary, the customer-owned banking sector believes:

  • A pre-funded scheme is unnecessary and will be costly to administer;
  • A flat rate levy on guaranteed deposits will impact customer-owned banking institutions more heavily given the concentration of deposits in our funding base;
  • A levy only on guaranteed deposits is anti-competitive and does not take into account the benefits accrued by the major banks due to their systemic importance; and
  • Any levy must include a contribution from the Big 4 banks to recognise the value they receive by being perceived as "too big to fail".

For more information and media interviews please contact:
Daniel McDougall, Senior Adviser Media
02 8035 8444 or 0407 637 541, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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