Australian Treasurer Wayne Swan urged bank customers to consider loans and services from credit unions and building societies as he prepares to release proposals to increase competition against the nation’s four largest banks.
“Competition from smaller lenders in the banking sector has to be activated by empowering consumers to shop around,” Swan said in a statement. “I’d encourage every Australian family to check out the range of products on offer.”
Swan has said he’ll issue a package of reforms this month to reduce the dominance of Westpac Banking Corp, Commonwealth Bank of Australia, National Australia Bank Ltd and Australia & New Zealand Banking Group Ltd. Calls from politicians to rein in the four lenders have mounted after they last month increased mortgage rates faster than the central bank raised borrowing costs.
Swan said many Australians don’t know they can buy services from 60 credit unions and building societies, which are institutions owned by their customers, at post offices. He will probably present his proposals, including ways to help building societies and credit unions issue more loans, to the Cabinet tomorrow and an announcement is likely on Thursday or Friday, according to the -Melbourne-based Age newspaper.
Public debate on competition in financial-services is increasing as key figures in the industry contribute to a senate inquiry. Australian central bank Governor Glenn Stevens is due to appear before the committee on Dec. 13.
Westpac, Australia’s second--largest lender, last week published its submission, saying there are currently 179 entities competing to sell banking services.
Chief executive officer Gail Kelly called on the government to introduce measures that reduce major banks’ reliance on offshore funds, which has become more expensive since the global financial crisis. The biggest banks have blamed those costs for driving up mortgage prices.
Kelly also said a “wide--ranging” inquiry should wait as long as four years, until the results of new worldwide rules on liquidity and capital rules become clearer.
In an interview on Saturday in the Australian Financial Review, Kelly said the only way to reduce mortgage prices was to help banks obtain cheaper sources of funding.
Australia’s four largest banks used the global financial crisis to tighten their grip on the home-loan market as smaller bank struggled to access credit.
The major banks, dubbed the four pillars after a law preventing takeovers among them, account for about 88 percent of the residential home lending market, according to data from the Australian Prudential Regulatory Authority.
Credit unions and building societies say the country needs more competition and have asked the government to introduce policies to help them access funding.
In a Nov. 30 submission to the senate inquiry, the Association of Building Societies and Credit Unions has asked for the introduction of a flat-fee guarantee of wholesale debt funding for smaller lenders.
The government has invested A$16 billion (US$15.7 billion) in Triple-A rated residential -mortgage-backed securities to support smaller lenders and lower the cost of funds, Swan said.
Australia’s largest lenders are already poised to face greater competition in other areas.
AMP Ltd, which is buying the Australian and New Zealand units of Axa Asia Pacific Holdings Ltd, plans to use the deal to compete in the wealth-management businesses of the largest banks, AMP chief executive officer Craig Dunn told yesterday’s Inside Business program on the Australian Broadcasting Corp.