12 things Wayne Swan can do to tackle the Big 4 banks
As the public anger against the four big banks continues, we wait with an air of expectation for Wayne Swan’s latest bank “reform” package to be announced.
This is not Swan’s first “reform” package. He announced one before and while some may have been excited about that earlier package, any excitement quickly faded as that package fizzled and the four big banks continued to thumb their nose at the Federal Treasurer.
Until independent competition and the conditions that allow independent competition to flourish are restored, consumers will continue to be gouged by the four big banks. Here’s a 12 point plan that might help provide a coordinated and targeted approach to the restoration of independent competition.
1. Place the four big banks under the competition spotlight by requiring the ACCC to formally monitor the four big banks under our competition laws. This allows the ACCC to get answers from the four big banks on the key issues of costs, fees and interest margins;
2. Implement a seamless switching package to enable customers to move easily and quickly between financial institutions. Switching financial institutions should be as easy as switching phone and electricity providers;
3. Amend the new national laws against unfair contract terms to deal expressly with the issue of unfair fees and, in particular to ensure that fees don’t materially exceed the reasonable cost to the bank of undertaking the activity to which the fees relate;
4. Explore opportunities for Australia Post to offer basic banking services like those offered by postal services overseas. This could involve asking the Productivity Commission to (i) undertake a feasibility study into Australia Post offering basic banking services; and (ii) review the overseas experience with national postal services offering banking services;
5. Extend indefinitely the retail deposits guarantee for APRA supervised non-major banks and financial institutions. This would provide complete consumer confidence in credit unions, building societies and other smaller financial institutions;
6. Strong and ongoing backing to the securitisation market where, for example, residential mortgages can be bundled together by smaller financial institutions and on-sold to investors, including to the Federal Government, to raise new funds to lend out to customers. This should also include an assessment by the Productivity Commission of the feasibility of Australia adopting the Canadian model in this area;
7. Direct the Productivity Commission to assess the impact on competition within the Australian banking sector as a result of the removal of St George, BankWest, RAMS, Aussie Home Loans and Wizard as independent competitors. This would provide the Federal Treasurer with a clear basis for seeking to stop further mergers and acquisitions by the four big banks;
8. Direct the Productivity Commission to undertake a review of the ACCC’s current approach to assessing mergers and acquisitions within the Australian banking sector. This would put the ACCC’s approach under the spotlight to prevent the ACCC repeating its previous mistakes of not stopping the four big banks from taking out the competition over the years;
9. Amend our banking laws to outlaw any merger between the four big banks so as to ensure that the four pillar policy is given the force of law and can only be altered by Parliament. In short, the four pillar policy should be set in stone and only capable of being changed by Parliament itself;
10. The Senate Economics Committee request a report from the ACCC regarding the circumstances under which the ACCC would apply for a divestiture order under our competition laws to undo a merger that is subsequently found to substantially lessen competition;
11. Amend our competition laws to outlaw (i) a merger or acquisition that “materially” lessens competition; and (ii) any “creeping” or piecemeal acquisitions by a company with substantial market share that would lessen competition in a market.
12. Amend our competition laws to provide for a general divestiture power whereby a Court can, on the application of the ACCC, order the break-up of a company (i) having substantial market share; and (ii) where either the characteristics of the market prevent, restrict or distort competition; or the company has engaged in a pattern of conduct that is detrimental to competition and consumers.
Over to you Wayne, and good luck with tackling the four big banks.
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