HomeView 2013 Media Releases27 billion reasons to end taxpayer subsidy

The big four banks’ $27 billion profit result shows what a great job they are doing for shareholders so why do they need a massive, hidden taxpayer subsidy?

The Customer Owned Banking Association (COBA) says it’s time to tackle elements of the regulatory framework that give the major banks an unfair advantage on their smaller competitors.

“Customer-owned banking institutions - credit unions, building societies and mutual banks - and other smaller players such as regional banks do not get a fair go and this is bad news for the long-term health of the retail banking market,” said COBA Head of Public Affairs Mark Degotardi.

“It’s a mistake to confuse the strength of the big four banks with the overall health and sustainability of our banking system,” Degotardi said.

“Policymakers understand we have a problem. Treasury confirmed recently that:

‘systemically important ADIs [i.e. the big four banks] do not pay for the benefits they derive from the market-perceived implicit government support which, as the IMF noted in its report on Australia’s 2012 Financial Sector Assessment Program, include lower funding costs than their competitors.’

“The IMF estimated that the 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.

“The IMF says the major banks enjoy implicit government support because of their systemic importance based on size, interconnectedness, and complexity. But banks that are ‘too big to fail’ distort competition and create new risks because they are backed by an implicit taxpayer guarantee.

“COBA sees this as a key issue for the Federal Government’s imminent Financial System Inquiry (FSI). The FSI must consider whether our major banks are too big and too dominant, and if so, what to do about it.

“COBA congratulates the Coalition Government for taking on the task of shaping our financial sector for the decades ahead through a FSI. We hope the ‘too big to fail’ issue is not put in the ‘too hard to fix’ basket and that Australia’s largest banks are asked to pay their fair share for the Government support they enjoy.”

For more information 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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Customer Owned Banking Association is the industry body for credit unions, building societies, mutual banks and friendly societies.  See coba3.nexusone.com.au

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