Australia’s government wants a “new pillar” in the banking system to provide competition to the nation’s four biggest banks, Australian Treasurer Wayne Swan said.
Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group Ltd and National Australia Bank Ltd — dubbed the four pillars after a law preventing takeovers among them — have become “arrogant,” Swan said in an interview with Channel Nine television. He urged borrowers to seek loans from credit unions, building societies and smaller banks that offer more competitive rates.
“The government is determined to see a new pillar in the banking system, particularly based on the mutual sector, particularly based on our credit unions and our building societies,” Swan said. “They are safe and they’re very competitive.”
Australia’s biggest banks have been criticized for raising borrowing costs by more than the central bank. They accounted for 87 percent of the home lending market in September, up from 76 percent three years ago. Swan said yesterday that his government’s package to encourage competition in the industry would be released next month.
Opposition shadow treasurer Joe Hockey called for a review of the banking industry in an interview yesterday with the Australian Broadcasting Corp.
More work is needed to develop competition, Swan said in his weekly economic note, published yesterday. Mutual credit unions and building societies can be a “strong competitive force” in the banking industry, he said.
The government has invested A$16 billion (US$15.8 billion) in Triple-A rated residential -mortgage-backed securities to support smaller lenders and lower the cost of funding, Swan said.
Commonwealth Bank reported on Nov. 15 a first-quarter unaudited cash profit of about A$1.6 billion. Westpac, Australia’s second-largest bank, earlier this month posted second-half profit that almost tripled from a year earlier, while ANZ Bank said a week earlier that earnings in the period surged 69 percent to a record. National Australia, the biggest lender to companies, posted a cash profit gain of 32 percent in the second half.
All four raised their standard variable mortgage rates by more than the Nov. 2 quarter--percentage point move by the central bank.
Australia’s Senate voted last month to hold an inquiry into competition in the banking industry, including the fees they charge.
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