HomeView 2013 Media ReleasesConsumers have a stake in the future of banking

The unfair advantages enjoyed by the big four banks must be a key target for the Financial System Inquiry (FSI) formally announced last night by the Federal Government.

The Customer Owned Banking Association today outlined its main priorities for the FSI, following the appointment of former CBA boss David Murray as head of the inquiry and the release of draft terms of reference.

COBA says the inquiry must focus on how to promote competition and consumer choice in the financial sector, including fair treatment of the customer owned business model.

“The Government’s focus on fostering competition, fairness, and innovation and reducing the regulatory burden is encouraging,” COBA CEO Louise Petschler said.

“However, there is an elephant in the room – actually, four elephants – not directly mentioned in the draft terms of reference.

“’While ‘systemic risk’ is covered, there is no explicit reference to the massive hidden subsidy the big four banks receive in the form of an implicit Government guarantee.

“This is a fundamental issue. The unfair funding cost advantage enjoyed by the big four banks if left unchecked will lead to greater concentration and more harm to competition, consumer choice and innovation.

“The FSI is a great opportunity to address this problem.”

Some other areas that need to be examined by the FSI include: 

  • culture of regulators and its impact on competition, consumer choice and diversity of business model;
  • consumer perceptions about the banking system, including the problem of major banks posing as regional banks or non-banks by using sub-brands;
  • more effective disclosure about ‘shadow banking’ institutions;
  • the proposed Financial Stability Fund levy; and
  • the high fixed costs of regulation that weigh most heavily on smaller players.

“Customer owned credit unions, building societies and banks are delivering excellent service to 4.5 million Australians,” Ms Petschler said. “But we need a regulatory framework that genuinely promotes competition and consumer choice.”

“COBA congratulates Mr Murray on his appointment. We look forward to engaging with the inquiry in the months ahead and we will provide feedback to Treasury shortly on the draft terms of reference.”

For more information please contact:

Daniel McDougall, Senior Manager – Media and Communication
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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