Within the report issued today there is an important section on Banking Competition (or the lack of it) in Australia. This is something we have been saying for some time. The Committee is quite damming on the role of the current regulators, non of whom, it appears is taking the lead on the question of competition in the banking sector. In addition, “Ongoing monitoring of the banking sector’s competitiveness will fill an important gap in Australia’s regulatory framework”.
A lack of competition in Australia’s banking sector has significant adverse consequences for the Australian economy and consumers. It: creates issues around banks being perceived as too-big-to-fail (TBTF) (such as moral hazard); reduces incentives for the major banks to innovate and invest in new infrastructure; and can allow banks to use their pricing power to extract excess profits from consumers.
The committee finds it very surprising that no Australian government has completed a wholesale review of competition in the banking sector in recent times.
More surprising, however, is that despite the Australian Competition and Consumer Commission’s (ACCC’s) clear concerns about the level of banking competition, it has acknowledged not closely monitoring the sector because ‘the RBA, APRA and ASIC are…observing the banks.’
None of these regulators, however, have a clear mandate to promote competition in the financial sector. The ACCC does.
The Reserve Bank of Australia (RBA) are primarily concerned with financial stability; ASIC with ensuring market integrity and protecting consumers; and APRA with ensuring the financial soundness of prudentially regulated institutions.
This means that no regulatory agency is regularly considering the level of competition in Australia’s banking sector and whether change is required
Exactly! Now, the question is, will anything be done about it? This is the root cause of many of the issues underlying financial services in Australia.
