HomeView 2016 Media ReleasesBanking inquiry report puts spotlight on competition

Today’s report by the House Economics Committee on the Review of the Four Major Banks has sent a strong message to the Government and regulators to act urgently to promote competition in retail banking.

Today’s report by the House Economics Committee on the Review of the Four Major Banks has sent a strong message to the Government and regulators to act urgently to promote competition in retail banking.

“The strongest recommendation to come from this inquiry is for regular, six-monthly reviews to improve competition in banking,” said COBA CEO Mark Degotardi.

“The report finds that the banking market is an oligopoly where the major banks use pricing power to the detriment of consumers.

“The report lists significant adverse consequences for the Australian economy and consumers, including reduced incentives to innovate and major banks extracting excess profits from consumers.

“Clearly, we need to unleash competition in the banking market and the top priority should be action to reduce the major banks’ unfair funding cost advantages.

“We welcome the Committee’s strong endorsement of the Financial System Inquiry’s recommendations to tackle these funding cost issues and narrow the gap between the majors and the customer owned banking sector.

“The customer owned banking sector has 4 million customers and $101 billion in total assets and is capable of increasing competitive pressure on the major banks.

“What we need is a fair regulatory framework that accommodates the customer-owned model in areas such as regulatory capital rules and taxation laws.

“Today’s House Committee report makes a number of specific recommendations. It is important to distinguish between measures that are unambiguously pro-competitive and measures that need further evaluation because they could have the perverse impact of harming competition.

“For example, recommendation 4 would force all banking institutions to embrace ‘open banking’ in barely 18 months despite concerns that this could be ‘prohibitively expensive’.

“COBA’s view is that ‘open banking’ has tremendous potential to empower consumers but forcing all banking institutions into an unrealistic implementation timetable would just harm competition. In the UK, it is estimated that moving to ‘open banking’ will cost each institution around $1.7 million. Extrapolated across our sector that would amount to $144 million or nearly a third of our sector’s net profit after tax in 2015-16.

“In the UK, the competition regulator announced a timetable for implementing ‘open banking’ for the largest banks which have a critical mass of the market. The UK competition regulator considered cost and proportionality and is taking a staged approach, with some measures being mandatory only for the largest banks. This approach avoids imposing unacceptable costs on smaller banking institutions while still delivering a more competitive market.

“COBA also does not agree with replacing the two existing external dispute resolution (EDR) schemes in retail banking with a new legislated tribunal. Consumer groups have warned that replacing EDR schemes with a tribunal would create a more legalistic structure and could lead to worse outcomes for consumers, and we agree with that assessment.

“We look forward to engaging with the Government as it considers its response to the House Committee report.”

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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

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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