HomeView 2014 Media ReleasesNew research finds financial services competition risk

Independent research released by the Customer Owned Banking Association (COBA) shows the major banks are tightening their grip on parts of the financial system outside banking, particularly funds management and financial advice.

The research report warns that this concentration should be of concern to competition regulators and that the emerging market power of major players would be expected to reduce product choice and innovation.

“We are handing this report to the Financial System Inquiry and to the Competition Policy Review to back our case for more pro-competitive policy settings in banking and the wider financial sector,” COBA CEO Louise Petschler said.

“The four major banks already hold almost 80 per cent of total assets in the banking market and this research shows their rapidly expanding share of other markets.

“The increasing dominance of four big, vertically-integrated players is a threat to sustainable competition, diversity and consumer choice,” Ms Petschler said.

The report by economic modelling firm Macroeconomics finds that since the mid-2000s there has been a material increase in the market share held by the four major banks in:

  • Funds Management;
  • Financial Planning and Advice;
  • Mortgage Broking; and
  • Life Insurance.

The report says: “Factoring in the markets shares of other major players in some sectors (including the role of controlled dealer groups or networks of advisers which is difficult to quantify) suggests the potential for major player control at 70 to 80 per cent in at least two of these sectors (Funds Management and Financial Planning and Advice). This concentration of activity should be a concern for competition regulators in Australia. A comparable analysis in the mid-2000s and before the GFC would have found each of these industries was more competitive, with only around half the market accounted for by the top five firms and the remaining half occupied by small and medium firms.”

The report canvasses a range of policy responses, including: ASIC publishing annual market share indicators; limits on market share; and, curbing or prohibiting deep vertical integration.

For more information and interview requests 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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