Try this pop quiz: How many of the following financial institutions do you think are owned by the big four banks?

Don't stuff it up

St George, BankWest, UBank, RAMS Home Loans, Aussie Home Loans, Wizard Home Loans, Bank of Melbourne, Bank SA.

If you answered “all of the above” (with regulatory approval pending for Commonwealth Bank to increase its stake in Aussie from 30 per cent to majority control) you’d be correct. Full points.

The tentacles of Australia’s big four banks are stretching out over the entire financial services industry gripping all within its power.

It’s the wolves dressed in sheep’s clothing approach to banking and I smell a rat.

In a recent survey of 1000 Australians by Abacus, the industry association for credit unions and building societies, just 53 per cent of those surveyed were aware that St George is now owned by Westpac, having taken it over in a GFC shotgun marriage in 2008.

And that was the most informed we got.

An even slimmer 36 per cent were aware that BankWest was also taken over by Commonwealth Bank in 2008 in a similarly hasty GFC stitch up, waved through by the competition regulator.

Just one in five knew that UBank is simply a brand created by National Australia Bank and just one in eight that Aussie Home Loans is today one-third owned by Commonwealth Bank with plans for a majority takeover.

Big banks have also swallowed a sizeable chunk of the mortgage broking industry – an industry that makes a living from the perception that it is independent from the interests of the lenders it refers people to.

These independent advisors are now in the uncomfortable position of giving advice to borrowers on the product of their own employer, along side other lenders of course, and taking different levels of sales commission along the way. Did somebody say conflict of interest?

National Australia Bank is by far the biggest bank operating in the mortgage broking space, having acquired mortgage broking networks Choice Home Loans, Plan Australia and FAST in 2009. Combined, these brokerages cover 5,500 mortgage brokers out of a total of 13,500 brokers Australiawide. NAB has rebadged the businesses “Advantedge”.

Elsewhere, Westpac took out RAMS Home Loans in 2008.

Commonwealth Bank will soon be majority owner of Aussie Home Loans and its network of 1000 or so brokers. In 2009, Aussie bought out the Mark Bouris founded Wizard Home Loans group, leading to the disappearance of that brand too.

Mark Bouris’s latest offering, Yellow Brick Road financial services group, has done a deal with Macquarie to write its mortgages.

Oh and the big banks have their tentacles in wealth management too. Have done for some time.

In 2000, CBA bought out Colonial Group. A month later NAB bought Lend Lease’s MLC businesses. Westpac swallowed BT Financial Group in 2002. In 2009, ANZ took full ownership of the wealth management arm of ING Australia and renamed the business OnePath.

Last year, Commonwealth Bank took over Count Financial, which in turn owns the mortgage broking network Finconnect.

By retaining the brand names of all the businesses they acquire, the big four banks are able to give consumers the illusion of competition while capturing the lion’s share of the market.

The underlying strategy is to lock down customers by bundling them into so many products with the one bank, from home loans, credit cards, business loans, share broking advice, insurance to super, that the prospect of leaving will be just too overwhelming.

And it’s working.

Reporting its latest multi-billion dollar profit, Commonwealth Bank produced a slideshow for investors boasting that the average number of CBA financial products per CBA customer has risen from 2 in 2007 to 3 today. Banks are becoming a one stop shop.

Meanwhile, Commonwealth Bank can boast a return on investor funds of 18.1 per cent in last six months of last year. A pretty sweet return for a business that is essentially government guaranteed.

Too big to fail, too big to control.

Make no mistake, the four pillars of Australia’s banking system have never been stronger, as competitors crumble around them, or, rather, they devour everything in their path. Recent home loan figures show 9 out of 10 new mortgages signed in Australia are with the big banks.

This lack of competition means consumers pay higher interest rates than otherwise.

In a parliamentary testimony last Friday, Reserve Bank deputy Governor Phillip Lowe urged consumers to negotiate with their bank for a better deal on the nation’s five million mortgages.

“You do not actually have to switch banks to get a better deal. In the current environment, if you go to your bank and say, “I’m going to switch unless you lower my interest rate,” it often happens.”

But that such discounts even exists suggests competition is not strong enough.

Momentum is gathering for a comprehensive review of the banking system, on par with the Willis Inquiry initiated by the former Howard-Costello government in 1997.

Shadow Treasurer, Joe Hockey, has committed to another “son of Willis” inquiry.

Credit unions have banded together to launch the balance banking campaign that you can follow at www.balancebanking.com.au A disgruntled former BankWest employee, Adrian Bradley, has registered a new political party to run at this election, the Bank Reform Party, which is planning to run candidates in Wayne Swan and Hockey’s seats.

Any inquiry must focus on unmasking the labyrinthine ownership structure of the banking industry so that customers can make a genuine and informed choice about who they bank with.

Don’t be fooled. Don’t bank with a big bank by mistake.

Comments on this post close at 8pm AEST

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80 comments

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    • Sarah Bath says:

      04:50am | 27/02/13

      shocking and gives credence to my argument doesnt it?  Banks, fnancial institutions and business should belong to the people and the profits shared equally.

    • Craig says:

      07:14am | 27/02/13

      I will bite - nationalising banks is a dangerous and risky idea.

      Where it has been attempted it had rarely provided a positive outcome, giving governments much greater ability to distort financial systems and use finance to control people’s lives.

      The profits of banks are today divided amongst shareholders. Anyone can become one with a small investment and this is a more equitable way of ensuring profits are reinvested appropriately - into expanding operations or returned to shareholders as dividends.

      The current situation where government regulated financial institutions and allows them to compete in the market is not a bad approach. Having ‘four pillars’ is far better than having just one - a government who may make decisions for political rather than profitable reasons.

      However there is constant need for government to ensure their regulation regimes are well-tuned, that any behaviour that reduce competition is managed sensibly and that profits are balanced against the needs of people.

      The current issue is that we are living with the legacy of a time of great fear. Our banking sector was allowed to centralize to prevent a bank collapse. Worst still these fears remain justified, neither Europe nor the US is out of the woods.

      This has led to more of a blind eye being turned to the actions of banks, so long a banks stay scrupulously within the law.

      At some point the pendulum will shift, banks will step beyond the tolerance of the public and government and regulation will change, potentially reversing banking centralization.

      However that time isn’t yet, and may not be ‘now’ for ten years or more. Right now having a stable banking system is worth far beyond its weight in gold, even if there is a cost in terms of a shift of power.

    • Nathan says:

      07:21am | 27/02/13

      what are you on? You are simply put either a troll or delusional.

      You have no idea of the benefits of business at all do you? Go back to school get some common sense study some history basically get a grip. This is from a leftie as well. To put you in perspective you make Fred Niles sound rational

    • GROBP says:

      07:30am | 27/02/13

      Oh please Craig.

      Really?

      The banks control government policy anyway, the difference is they control with making money for the bank as their prime motive. How can you write such stuff. Where are your examples of failed government banks? I’ll give examples of success’s. Australia where everyone owned a house that wanted to, everyone that wanted to worked, kids had a predictable future, houses weren’t nine times wages, pension when you retired. Now dual income and people are hocked with 50% of their wages for 30 years. Pay tax their entire work life, save in to super and get no pension. So explain to me very slowly, how are we better off?

      Life in Australia is getting harder and harder because banks are transferring all our wealth to their accounts (no pun intended).

      The reality of how hard things are will not be apparent until all our assets are foreign owned, our wages sink, we still owe the bank more than we’re worth…. (not me…no debt). Population will be 50 million and there’s no farm land or business’s that generate wealth to feed everyone let alone prosper.

      We’re doomed and most people refuse to see it because they doing well in the now. The very near future will be infinitely different.

    • GROBP says:

      07:37am | 27/02/13

      @Nathan….I’m guessing you’re responding to Sarah Bath?

      Tell us all Nathan. What are the benefits because I’m guessing more and more people aren’t feeling it.

    • Alfie says:

      07:42am | 27/02/13

      “shocking and gives credence to my argument doesnt it?”

      Errr…no.

    • Al says:

      07:53am | 27/02/13

      Sarah Bath - funny, as far as I am aware all the banks are listed on the Stock Exchange which means that ‘the people’ can own a part of them and share in the profits if they want to (and the losses when that occurs).
      But I guess, going from other comments you have made, you actualy mean ‘people’ share in the profits with no risk and no effort on the part of the individuals concerned and not to be shared by any of the people who actualy earn a decent wage right?

    • Nathan says:

      07:56am | 27/02/13

      @GROBP
      Firstly you cannot blame inflation, housing affordability, employment issues all on banks and financial institutes. Show me how they are connected? You can’t ask someone to prove you wrong when you base your argument on myth.

      Lets start with housing affordability - Demand Increases faster than supply and there is only so much land (not the banks fault) more to do with people wanting big blocks of land
      Unemployment - Some of the lowest levels Since 1978 so that is BS
      Pension when you retire - Still there is it not? Is the banks fault that everyone had sex after the war and we have the baby boomer’s approaching retirement.

      I am not a fan of the Banks but they are not responsible for all the problems, the world is a different place.

    • GROBP says:

      07:59am | 27/02/13

      So with your “economics credentials” that are based on academics guessing what happened in the past before the modern economy started (about 30 years ago with globalisation). Please Craig, Nathan and Alfie; let’s hear it really slowly so us economic illiterates understand, how are we better off? Also while you’re there please explain, again really slowly how we’ll prosper after we’ve sold all our producing assets and have a population of 50 million. Perhaps you could give us examples of other western countries that are doing well using the model you subscribe to.

      It’s puzzling how you’re all experts using economic theory from BEFORE globalisation and somehow think it applies. I’m certain their have been microcosms of globalisation where a town’s been ruined by transferring wealth to another. That’s what we’re doing on a bigger scale.

      The BS you people spruik makes zero logic, other than transferring all of Australia’s wealth to other countries and big business.

      It’s all one big scam and you all know it.

    • GROBP says:

      08:11am | 27/02/13

      Nathan, the world is a different place I agree but Australia had all the aces. We had sheep, then we had gold, now we’ve got iron ore and coal.

      We had options, now we don’t. We could have taken the cream of globalisation and left the other stuff to the dumb countries, instead WE ARE the dumb country.

      What next? Apparently we’ll all sell our education and technical expertise to Asia. That is laughable. They are smarter, work harder and earn way less. It’s the most ridiculous concept I’ve ever heard.

      Are you telling me the banks didn’t encourage the government to populate? They don’t have “economists” in the daily news telling us “get in now or never”.

      To stimulate housing with grants and lower LVR’s. Come on Nathan, you’re a smart guy, you either have a vested interest or you haven’t thought it all through.

    • AdamC says:

      08:56am | 27/02/13

      Sarah Bath is trolling you, everyone.

      She was doing the same thing yesterday with another ludicrous comment.

    • Number Cruncher says:

      08:58am | 27/02/13

      @ GROPB, man you peddle a lot of twaddle.

      1.  The banks have nothing to go with government or asset owners selling Australian assets to foreign investors.
      2.  Not everyone in Australia at any point in time has owned a house.  There are always people that cannot afford or chose not to enter into home ownership.
      3.  The choice to take out a 30 year mortgage is a personal one.  No one forces you to borrow.  What happened to the good old days where people used to save for their wants rather than borrow or put on the credit card?
      4.  Tax is a necessity to provide essential services for the community.  FACT - only approx 50% of the working population are net tax payers.  The mdidle to high income earners are the main contributors to the tax system.  Everyone should pay a little tax as everyone benfits in one way or another.
      5.  Pension was never meant to subsidise retirement in the long term - it was only ever implemented as supplement.
      6.  The strength of our banking system also allowed us to ride out the worst of the GFC.  How many Aus banks have you heard of that had liquidity issues and were unable to pay out customer withdrawals?
      7.  Please expalin how the banks are transferring all our wealth to their account? 

      Those that took out mortagges at 100-110% value of their house deserve what is coming to them.  Rather than budget and go without and save for a few years, they decided they had to have what they couldn’t actually afford right now.  There have always been needs and wants however today, it has beocme easier for everyone to get access to their wants by borrowing.  No one forces you to do this - it is a personal choice. 

      The problem is not with the banking system, it is with the consumer who feels entitled to what they can’t realisiticly afford through honest hard work.

    • Neil says:

      09:04am | 27/02/13

      @Nathan, they are not entirely responsible for high house prices but are far and away the biggest cause. To assert otherwise is insanity.

      It’s called cheap credit. You’ve never heard of people asking the bank for a loan and them offering so much money that the borrowers would be left with about $100 a week to live on?

      Back in our parents’ day you had to have a 20% deposit, so if one saved $20k they can borrow $100k. Now you only need about 5%, so that $20k allows one to borrow $400k. Add in socialist measures like the First Home Vendor’s Grant at $7k and that $27k allows them to borrow $540k at a 95% LVR.

      Get a clue.

      Mortgages are the banks’ primary source of income, it’s not all their whizz bang stock market stuff, it’s the simple leeching off of what I consider a basic right. Affordable housing.

    • OverIt says:

      09:06am | 27/02/13

      Sarah Bath according to her previous posts “chooses not to work” as she doesn’t want to work for “capitalist pigs”. Althouth she’s quite happy to live off their money WITHOUT working for them. Oh the hypocrisy of taking money from said “pigs” to support her in her choice.

      And no wonder she wants to get her hands on profits she herself contributes nothing to.

      Just one thing Sarah, isn’t it a condition of receiving Centrelink payments that you actively search for work?  Choosing not to work removes you from entitlement to receive them, and removes the onus on “capitalist pigs” from having to support you.

    • GROBP says:

      09:15am | 27/02/13

      @Number Cruncher

      ...........”@ GROPB, man you peddle a lot of twaddle”.........

      I could refute every point you’ve made. Some of what you’ve said supports what I said, some is just simply, you not connecting the dots. I’m not going to bother for someone that can’t think for themselves while telling me I peddle twaddle. Start thinking mate, or you’ll lose the lot.

      Maybe read what I’ve written and think it through. If you’ve actually got anything sensible to debate, I’m here.

    • wakeuppls says:

      09:25am | 27/02/13

      Number Cruncher

      “4.  Tax is a necessity to provide essential services for the community.  FACT - only approx 50% of the working population are net tax payers.  The mdidle to high income earners are the main contributors to the tax system.  Everyone should pay a little tax as everyone benfits in one way or another.”

      50% of the federal budget goes to welfare. How you can justify a system that is clearly beneficial to some at the cost of others is mind boggling.

      “6.  The strength of our banking system also allowed us to ride out the worst of the GFC.  How many Aus banks have you heard of that had liquidity issues and were unable to pay out customer withdrawals?”

      You’d be strong too if you were allowed to counterfeit money. The amount of irresponsibility required to drive a bank into the ground is nearly insurmountable. To do it with any kind of efficiency requires exotic financial instruments like derivatives investment.

      “7.  Please expalin how the banks are transferring all our wealth to their account?”

      They are accountable for 90% of inflation, which is essentially theft through devaluation.

    • Number Cruncher says:

      10:19am | 27/02/13

      @ GROBP….please go ahead and refute.  Please oh please make me understand which dots I am not connecting or which pieces of the jigsaw puzzle I am missing. 

      You make out like 30 years ago no one was wanting for anything and these days everything is so hard.  The reverse is actually the case. 

      Australia alone does not have the capital required to make our economy turn to its full advantage.  Foreign investment is a requirement to keep the wheels turning. 

      We are not transferring our wealth to foreign nations.  Even the mining companies, which might have a percentage of foreign owners, are listed entities that anyone can buy a share in if they wanted. 

      You may recall Cubbie Station in QLD was sold to a Chinese company.  If you actually read the terms of sale, they have only brought an 80% stake to be sold down to 51% in 3 years.  Mechanisms like this are common with foreign investors.  It ensures that they get the asset up and running to full potential and the shortest timeframe and allows for others (read Australians should they wish to participate) to get a finger in the pie once the hard yards are done.

      The problem is not that we are selling to foreign owners but that Australians do not seem to want to take on the risk a lot of the time. 

      I can’t help but notice you were unable to explain how the banks are transferring our wealth onto their account (by which I think you might mean balance sheet).

    • GROBP says:

      10:36am | 27/02/13

      The bankers and politicians have no clue about the economy or where their manipulations and trickery will take us. Actually scrub that. They know exactly where they’re taking us, but their interests come way before Australia.

      How many of them predicted the GFC? NONE.

      I can rattle off half a dozen economists who did, that are now saying what we’re doing is wrong and will lead to disaster.

      Politicians go with the same old tired model of supporting big business, selling assets and racking up more debt.

      Australia will be exactly like Greece, Italy and Ireland within a couple of decades because we’re letting the people with massive vested interest drive policy.

    • Number Cruncher says:

      10:44am | 27/02/13

      @ wakeuppls, I am not justifying the tax system.  In fact, I am trying to say that more people should pay tax.  Eveyone benefits, everyone should pay.  Only 50% of the working populaton paying tax is ridiculous. 

      Our banks do not counterifeit money.  US and European banks may’ve dealt with and traded dodgy derivatives.  Our banking system is far much more transparent.  Also, customers doing a run on banks and withdrawing their savings all at once can bring a bank to its knees which has nothing to do with mismanagement.  Think Northern Rock in the UK.  Banks are not setup to have this happen - money deposited is then lent out as loans with a buffer kept to fund withdrawls (to explain it simply).  True, Northern Rock was not funded in an ideal manner, but it was brought to its knees by its customer base, not mismanagement. 

      Please explain how the banks are responsible for inflation?  My understanding was supply and demand determines prices.  Banks lend money to enable transactions that affect supply and demand but they are in no way responsible for creating that supply and demand.  If you are going to have that train of thought you should be blaming the RBA, not the banks!

    • davo says:

      10:55am | 27/02/13

      Sarah, have you read the book,Animal Farm?

    • PJ says:

      11:02am | 27/02/13

      Well it takes talent to run profitable financial institutions and talent wont stay to work 12 hours a day for very little.

      So your Banks etc will be closed for business within a couple of months.

    • Tubesteak says:

      11:05am | 27/02/13

      Guess what?

      Banks are run by people. People work in them. People own shares in them. People engage their services.

      You’re talking about socialism. A system that has failed everywhere because of its inherent inefficiencies and uselessness.

      If people are too stupid to do their own research then they deserve to be taken advantage of. Caveat emptor.

    • Number Cruncher says:

      11:08am | 27/02/13

      Peter Costello predicted the GFC

    • GROBP says:

      11:17am | 27/02/13

      I don’t think anyone’s even mentioned taxpayers are guaranteeing bank deposits, while the bank increases its’ lending risk with ridiculous LVR’s, while locking many tax payers out of the same housing market.

      So the banks risk is socialised.

      No that’s not manipulative and banks running politics is it?

      I’m telling all that will listen. This will end in tears, there is no other credible outcome.

    • Christine says:

      11:34am | 27/02/13

      Sarah,
      The owners of Banks and financial institutions are the shareholders whether it is directly with shares, or through managed funds or superannuation.  The very people who work, earn an income, pay taxes and put effort into their lives to be self supporting.

    • wakeuppls says:

      11:50am | 27/02/13

      Number Cruncher

      “I am not justifying the tax system.  In fact, I am trying to say that more people should pay tax.  Eveyone benefits, everyone should pay.  Only 50% of the working populaton paying tax is ridiculous.”

      You are justifying it because nowhere in the history of humanity has there been 100% employment and the fact that someone on 20k a year has access to very expensive healthcare procedures is yet another testament to the inherent inequality in income tax.

      “Our banks do not counterifeit money.  US and European banks may’ve dealt with and traded dodgy derivatives.  Our banking system is far much more transparent.”

      All banks in fractional reserve lending systems (including all Australian banks) are effectively counterfeiters. I suggest you actually research the banking system before making these kinds of claims.

      “Please explain how the banks are responsible for inflation?  My understanding was supply and demand determines prices.  Banks lend money to enable transactions that affect supply and demand but they are in no way responsible for creating that supply and demand.  If you are going to have that train of thought you should be blaming the RBA, not the banks!”

      Again, researching the fractional reserve banking system will present you with answers to this question as clear as day. The RBA is the first domino in the exponentially increasing chain of dominoes leading to currency devaluation.

    • Economist says:

      11:52am | 27/02/13

      Where to start? There is so much to comment on.

      Firstly, the article simply highlights that Banks have vertically integrated to cater for all our financial needs and assets. Surprisingly their ‘super profits’ come from interest rate differentials between savings and lending rates, insurance, fees for service including accessing you own money and charges for advice. 

      I’d argue that the interest rate differentials are not as significant as claimed and are coming down post GFC. The problem with this vertical integration is that yes it makes it more complex to regulate and for consumers to understand, but it also reduces the risk of banks collapsing.

      Secondly GROBP while I like the idea of focusing on the growing field of economists that are looking at new theories and a return to focusing on the ‘real’ economy, like Steven Keen,  the doomsday theories have no basis in reality. Price signals change behaviour for every claim made about selling assets overseas and 50 million population prices will adjust accordingly.

      Thirdly inflation is caused by multiple factors. You can’t claim it’s all the central banks fault it’s far more complex. For example our current account deficit helps keep inflation in check. In fact that is one of the advantages of globalisation. Wakeuppls I’d like to know where you are getting the 90% from?

      Finally Number Checker while I’m glad to see you support taxes, more than 50% of the population pays taxes. In fact everyone pays taxes, What your arguing is that only around 50% are net income tax payers. This is only one source of tax revenue and the cross subsidisation of others Australians, whether through welfare or subsidised services, assists in other aspects such as improved life expectancy and social cohesion.

    • Tropical says:

      11:53am | 27/02/13

      “Banks, fnancial institutions and business should belong to the people and the profits shared equally.”
      You really are a clueless Troll.
      Move to Cuba - your Castro’s type.

    • GROBP says:

      12:28pm | 27/02/13

      @Number Cruncher

      ....“You make .... case. “.........

      I’m actually saying if you were prepared to work 30 years ago, you could have everything. I’m more talking about what’s coming than now, housing’s ridiculous and consumes people’s earnings. It wasn’t like that in the past, the numbers prove it (use the numbers Number Cruncher). That is the main way peoples’ money is transferred to both banks and government. Life is good, it’s what’s coming that won’t be.

      .............“Australia .......wheels turning.”.............

      Rubbish. To get it out of the ground as fast as possible so we can bid up housing and consume, yes we needed foreign investment but it is short term thinking. We are selling our money making machine. That can’t be smart, no matter what Keynes says.

      ...............“We are not transferring our…... they wanted.”............

      85%; you know that, you just couldn’t say it. Most of us are invested in these companies via super, what’s your point? We’re still selling Australia, it’s not this generations to sell, the last generation built much of it and the next generations, you know our kids, should get some too don’t you think?

      ...................“You may recall Cubbie ... done.”..........

      What’s with the shortest timeframe? Who cares how long it’s mothballed for? It’s Australia’s land and should be fully retained for our benefit, with declining yields and a growing population we’re going to need it. So where’s the 300 million gone? It will end up being consumed and therefore with the banks via massive mortgages..If we didn’t need it, why sell it, why not lease it? Cubbie is just a headline, there’s tens of thousands more farms been sold in entirety and it will all come to bite us.

      ..............“The .. time”.........

      Australians don’t need to take risk. It’s all “given” to us via housing appreciation and generous welfare. Life couldn’t be simpler. Houses appreciate, we borrow against the equity and spend. How could this possibly go wrong? It’s about to.

      ..............“I can’t .. balance sheet).”..........

      I didn’t attempt to remember? (In fact I already had in my post before yours). It’s via massive house prices, therefore massive mortgages. We’re all little money making soldiers for the bank. Out we go to work, and then every second Thursday transfer a huge chunk of our wage to the bank for an asset we paid more than double it’s worth (much more than double when all this hits the fan and wages tumble).

      See it’s not twaddle. It’s simple logic.

    • wakeuppls says:

      12:40pm | 27/02/13

      Economist

      The private banking system outside the RBA causes 90% of inflation by lending 10x (or more) than they have on deposit. The money lent is then re-deposited into a bank who then can make the same fraudulent transaction with their next client, so on and so forth. You quickly have several orders of magnitude more credit in the economy than you did when the RBA first bought bonds with money it printed out of nothing.

    • GROBP says:

      12:42pm | 27/02/13

      @Economist

      ...“Price signals change behaviour for every claim made about selling assets overseas and 50 million population prices will adjust accordingly.”....

      That makes sense, similar to we will never cull all the fish in the sea because the last of them will be too hard to catch. Still not a great solution. Isn’t it better to have abundance for generations to come?

      If I’m wrong no big deal, if the pro sell/populate is wrong very very big deal.

    • expat says:

      01:03pm | 27/02/13

      Banks and financial institutions are owned by the people Sarah, it’s called shares and there is nothing stopping you going and buying into them. If you are referring to nationalisation then I might suggest moving to either Cuba or North Korea.

    • Economist says:

      04:02pm | 27/02/13

      wakeuppls , yeah but some of that money is being loaned to increase production capacity of goods and service, to reduce prices in other sectors of the economy (including housing) and loaned to businesses to create competition where they see a potential grab for market share (keeping prices down). Damned if you do damned if you don’t.

      GROPB perhaps, I continue to love your environmentalism while despising the Greens.

    • Esteban says:

      04:35pm | 27/02/13

      Prior to the de regulation of banks and even immediately after the great complaint about our bastard banks was that they were tight bastards.

      It was difficult to get a loan. People demanded that banks relax their lending criterion but the banks held firm. For instance the female’s wage was excluded in case she got pregnant and couldn’t help with repayments.

      Imagine doing that these days without an anti discrimination law suit.

      Other things such as the loan term not exceeding retirement age was strictly adhered to even though super was becoming more common.

      Two things changed.

      Firstly the entry into the market of organisations such as Aussie Home loans who did have relaxed lending conditions but they charged mortgage insurance.

      The people were happy. The banks were losing serious market share and had to slacken their lending conditions or risk becoming a fringe player.

      Bit by bit lending requirements relaxed and it became easier to get finance. I can assure you the banks were dragged along by the public’s demand for finance and willingness to go to another lender.

      Ask any lender what it is like to decline a loan then face a customer’s wrath after they come back and tell you that at Aussie they looked after me.

      This was not an orchestrated move by banks.

      The second thing that happened is the massive loss that Westpac made in 1992 or there abouts.

      Home loans became a method of shoring up their balance sheet (along with a rights issue) because home loans had less capital adequacy requirements than commercial loans.

      Then we had serious competition with banks actively poaching loans from other banks (refinancing had been a rarity) and not enough blue chip applicants to go around.

      So yes relaxed lendind conditions has contributed to higher real estate prices but so too has demographics such as dual income households being the norm rather than the rarity.

      Suck it up people you got what you wanted - easy finance. The fact that there were no young and keen economists around to warn of the consequences says more about economists than the banks.

    • Mahhrat says:

      05:31am | 27/02/13

      Again, I’m sure there is a great point about the lack of actual competition in Australia’s financial sector and the damage that’s doing, particularly to small business - but I just got lost in all the cliches.

      Seriously, could you use any more irrelevant adjectives?  Fair suck of the sauce bottle.

    • acotrel says:

      05:41am | 27/02/13

      Tony Abbott will fix everything - ‘don’t you worry about that, now’ .

    • Christian Real says:

      07:56am | 27/02/13

      acotrol
      Are you saying that Abbott will be another clone of the late Joh Bjelke Petersen, I thought Campbell Newman had already claimed that title.

    • Andrew says:

      08:05am | 27/02/13

      From someone who actually would likely fall on your side Acotrel, give it a break for once, you only do more harnm then good for your side. This has nothing to do with partisan politics.

    • PJ says:

      12:33pm | 27/02/13

      Well Julia Gillard fixed us good and proper ....130 years of Debt repayments.

      And after having bombarded us with austerity measures for their promised Surplus, which would enable them, they said, to take Australia forward, they are now telling us only by spending up a storm can they move Australia forward. Queue 260 years of debt repayments.

      The Gillard Government, if you don’t like their commitment to one policy, just wait 5 minutes, they’ll change their full commitment too another.

      Clueless by definition

    • Alfie says:

      03:12pm | 27/02/13

      He will fix Gillard.

    • Disgusting Stained (4 tes) says:

      03:21pm | 27/02/13

      acotrol
      CR “Are you saying that ....”

      So cutsie, watching all your little posts, quaint it aint, you might need to apologise to him when he rolls over for calling him a “trol”
      Can’t you just tap him on the shoulder when you need to speak…he’ll turn round.

    • Christian Real says:

      04:10pm | 27/02/13

      acotrel
      “Feeding the chooks. ’ was another one of the late Joh Bjelkie Peteresen sayings and it looks as though some of the Liberal cluckers are free ranging well in these blogs.

    • GROBP says:

      05:59am | 27/02/13

      The government sanctioned banks have destroyed Australia’s entire future. And we voted for it.

    • Alfie says:

      07:45am | 27/02/13

      The Labor government sanctioned by unions have destroyed Australia’s entire future. And you voted for it.

      There…all fixed.

    • GROBP says:

      08:14am | 27/02/13

      How dare you tell me I voted for them. That is insulting.

    • GROBP says:

      06:22am | 27/02/13

      I’ll tell you what conflict of interest is.

      How about Boris wanting to start a new bank talking about how more banks is great in every article he does in the SMH? Hasn’t helped America has it?

      Or Dr Wilson FROM THE BANK talking up RE. Or Joye doing the same. Or or or or.We are mugs watching our country be sold, and our lifestyles destroyed while we dither and vote in either of the idiot parties colluding with them.

    • wakeuppls says:

      06:46am | 27/02/13

      The inquiry won’t turn over the fraud that is fractional reserve lending, so it is a complete and utter waste of time. How as a society we can justify throwing someone in jail for lending money they simply do not have where banks entire business is based on it is just absurd.

    • Al B says:

      05:58pm | 27/02/13

      This…most people laugh when u explain fractional reserves to them, its that ridiculous in principle.

    • pete says:

      07:00am | 27/02/13

      Everyone should be very concerned about Mark Bouris and in turn Chris Joye having their noses in Joe Hockey’s office.

      btw it’s “Sons of Wallis”.

      Being the economics editor of News Ltd, it might be handy knowing that…

    • GROBP says:

      08:57am | 27/02/13

      “Everyone should be very concerned about Mark Bouris and in turn Chris Joye having their noses in Joe Hockey’s office.”

      Huh? What’s going on?

    • Adam says:

      07:22am | 27/02/13

      Everyone goes on about how there isn’t enough competition among the ‘big 4’ banks - and I don’t disagree. But they are hardly the worst industry for concentration and a lack of competition. In fact, they are probably the best!

      There aren’t:
      - 4 big supermarkets (there are really only 2)
      - 4 big telecommunications companies (also only 2)
      - 4 big airlines (gee…detecting a pattern here)
      - 4 big travel agents (pretty much dominated by one company here)
      - and so on.

      There are 4 big petrol companies, so I guess that is similar. Like I said, banking isnt perfect, but I can’t think of any other industry where there are at least 4 credible large firms.

    • Neil says:

      07:51am | 27/02/13

      They aren’t backed by the taxpayer though. So if the banks fail we will have to give them billions just like they did in the US.

      This means that policy is essentially created by banks so that we don’t have to bail them out.

      Like Labor’s policy of selling our real estate to foreigners so that there isn’t a house price crash.

      I believe they call that fuedalism, or crony capitalism. It certainly isn’t democracy and a free market.

      It’s also happened in the UK, where the UK government owns 82 percent of the Royal Bank of Scotland.

    • Al says:

      08:19am | 27/02/13

      Neil - or rather than giving them taxpayer money we just let the fail.
      I know, I know that would be a disaster as so many people would loose so much. One of the issues with what happend in the US is that it just gave those in the banks/financial institutions time to get there own assets out of the way before they crashed further rather than stabilising the banks.
      This is of course aside from the fact that banks are able to ‘loan’ out money they don’t have and get it paid back actual money with interest. It is basicly a licence to create money.

    • GROBP says:

      08:59am | 27/02/13

      I think the ACCC needs a competitor…haha….

    • Timmy says:

      08:40am | 27/02/13

      Yep,
      Monopolies over anything is a bad thing.

      I’m assuming that was the point of this article?

    • Tony says:

      08:54am | 27/02/13

      I’m fairly certain ‘Back in the Day’ you couldn’t borrow as much as you could now. In fact I know you could only get a loan on about 80% of the husband’s income. Now you CAN get up to 100% loans on a joint income, which is helpful for people who want that risk, but I am still working on a smaller model, I am still saving up for a large house deposit, and I am still looking at the half million range rather than the million dollar range for a house for my family.

      Banks wouldn’t be successful without people wanting to buy their products. This may come as a surprise to some, but a lot of Aussie’s WANT to take out 100% loans, because they want the awesome car/house now, and they’ll worry about paying it back later. The difference between AUS and the US is that we are trying to regulate who can give loans, what institution can own mortgages and who can get the loan. After the GFC people forget the minor tweaks Swan made to bank regulation, (most of the work was done by his predecessors on both sides of politics). We are safe, yes life is a rip off but get used to it.

      As for selling our agricultural land to corporations, even overseas corporations, the farmers I know are first generation Aussies, some actually are immigrants, their farms are run like corporations today because that’s how it works. A large farm isn’t the same as ‘Joe’s Electrician Business’, it’s a multi-million dollar diversified company.

      STOP THE DOOMSDAY TALK, THE ECONOMY HAS AND ALWAYS WILL BE A BASKET CASE, JUST CHILL OUT FFS.

    • andrew says:

      11:41am | 27/02/13

      I agree Tony, it’s ridiculous that a loan will be granted on the assumption that both partners will be continuously employed for the next 30 years.
      Personally I hate paying a bank even a cent of interest more than i have to, so bought my first property with a 35% deposit. We’re planning on upsizing in a year or so and aiming for a 70% deposit this time. Any subsequent purchases will be saved for, not borrowed for.

    • AdamC says:

      09:02am | 27/02/13

      It is weird. I actually did know about all of those. The St George and Bankwest acquisitions were massive news. The (re-)creation of Bank of Melbourne by Westpac was also big news in Victoria, in part because of a leaked Westpac board paper that branded Melbourne a ‘provincial global community’. (Which is kinda true, but they shouldn’t say it ...)

      And, to be fair to NAB, they make clear in their ads that UBank is ‘backed by NAB’.

      What I do not understand about the credit unions and building societies is how they seem so chronically unable to seriously compete with the big commercial banks. Banking is a scale business, on one level, but it is also a localised one. In many countries, there are lots of local banks that many people use in individual communities and regions. We do not seem to have that here.

      The ABACUS members will not get customers merely because they are not the big 4. They need to be competitive.

    • James1 says:

      10:32am | 27/02/13

      From the perspective of a consumer, credit unions are competitive.  I get way lower interest rates, and pay far less fees, with my current credit union than I ever did through Commonwealth or NAB.

    • Jess says:

      02:40pm | 27/02/13

      Also the free use of other institutions ATM’s that what shows who is assoicated with who.

      Most people wouldn’t know about all of them because they only use 1 or 2 banks and know about who backs them.

    • Gordon says:

      09:28am | 27/02/13

      Put your money in bank shares not in the bank. Then the bastards are working for you not on you.

    • Esteban says:

      11:52am | 27/02/13

      You are quite right Gordon. Bank shares are great and if you follow them closely good buying windows open up a few times a year.

      Of course Gordon as a bank shareholder you are now a part owner so you are now one of the bastards yourself.

      Given that most people who have super in Australia are indirect shareholders (owners) of banks then in fact we are a nation of bastards.

      Most Australian super has done very nicely thank you very much from Australian banks.

      It is also a good day for Wayne Swann when the banks pay their billion and billions in tax for him to redistribute.

    • Andrew says:

      10:05am | 27/02/13

      Isnt this why we had the Commonwealth bank?

      A stop gap check for competition? A government owned bank to ensure competition?

      The biggest piggy bank of them all Paul Keating must be rolling in bank money

    • HereComesDaJudge says:

      11:04am | 27/02/13

      I think the sadness of the present day is that we Australians - what few there are left - are the most apahetic race in the world!

      I mean, we put up with just about everything, hell, we’ve allow an incompetant and corrupt Government to destroy what was once the cheapest and most wonderful country in to the world to now being nothing but a train wreck!

      Banks are soooo big and soooo confusing to the average person, like our doctors, we just believe whatever they tell us.

      I know, I worked in the NAB for twenty three years! Customer service is a no no and the old days of helping a business out, even if a tad risky, are gone.

      Now it is the money or the highway principle!

      You say we are not apathetic?

      Then how come we let Acrotel rant on with his meaningless and deluded comments on pretty most everything!! (Joke)

    • ibast says:

      11:38am | 27/02/13

      Even Costello regrets allowing the Westpac takeover of StGeorge. The fact is free market forces don’t work properly when an oligopoly exists.  When there is less than 6 players in a market, governments should be regulating to some extend.  That regulation should increase dramatically as that number reduces.

      Remember Adam Smith assumed that both supply and demand were infinite in his theory and we should keep that in mind when people start calling for less government intervention.

      We see it with the retailers in this country.  In that case they corrupt the free market on both sides of the equation.  They screw the farmers over because of limited demand and then screw the buyers over because of limited supply.  Governments shouldn’t feel guilty about regulating situations like this, because free market forces just don’t work properly in that situation.

    • wakeuppls says:

      12:04pm | 27/02/13

      ibast

      Ask any small to medium sized business owner and they will tell you it is regulation that makes it impossible to compete in this country. And when you have the banks writing the legislation to hurt competition, begging for more regulation from an utterly corrupt political class is just about the worst plan you could possibly come up with.

    • expat says:

      01:21pm | 27/02/13

      wakeuppls is correct, regulation is anti competitive at it’s very best. The cost and resources to comply often makes the small business uncompetitive from word go.

    • ibast says:

      03:59pm | 27/02/13

      I’m not talking about regulation rather than bureaucracy.  There is a difference.  Regulation may require no further bureaucracy.  And I’m not talking about markets where there are numerous suppliers, such as is seen with small businesses.

      I’m talking about oligopolies and legislation to ensure these big businesses don’t take undue advantage of their market dominating position.

      I’m talking Banks and Supermarkets here.

    • Alfie says:

      12:10pm | 27/02/13

      If it wasn’t for our independent and profitable banking sector, Australia would be in deep shit right now.

    • Neil says:

      01:15pm | 27/02/13

      You mean the real estate sector would be in deep shit.

      It is not independent. It is backed by the taxpayer, and governments and the RBA kowtow to it’s desires.

    • Alfie says:

      02:01pm | 27/02/13

      Banks were backed by the government during the GFC only, repeat only if they were to default. There was no financial support from government or the taxpayer.

    • PW says:

      02:39pm | 27/02/13

      “Banks were backed by the government during the GFC only, repeat only if they were to default. There was no financial support from government or the taxpayer.”

      Sounds a bit like an insurance policy, hey, like what you have in case your house burns down. Only thing is, I pay a premium for it. The banks should too. A 2.5% company tax surcharge should do it. The same surcharge to apply to bank dividends. The banks can opt out if they want, or rejoin if they want, but there is a 5 year waiting period.

    • Esteban says:

      03:22pm | 27/02/13

      PW. The bank’s have happily opted out of the Govt guaranteeing them.

      Way back in the de regulated banking days the banks had to have a “statuatory reserve depost” (SRD)of about 20% of their total deposits. This amount was lodged with the RBA.

      In exchange for the SRD the Govt guaranteed all deposts in Australian banks.

      Those days finished over 20 years ago.

      For over 20 years, except for a brief period at the height of the GFC, there has been no Govt gurantee of deposits in Australian banks (notwithstanding the Govt guranteed CBA deposits until 10 years or so after they were sold off).

      Whilst I am outspoken about the stimulas package I think that the gurantee during the darkest GFC hours was quite sensible from the Govt.

      As banks were starting to go broke in Europe and USA Governments were providing gurantees to prevent panic runs on banks which would have seen a complete financial collaps.

      Although our banks were strong not even the strongest bank can with stand a run on it.

      There was a real risk that money would have left our un guaranteed banks to go to weaker but Govt guaranteed banks in Europe.

      To prevent that happening Swann guranteed bank deposits.

      That guarntee has now been withdrawn without costing a cent. The only real success that this Govt has had in getting something right without costing anything.

    • Neil says:

      03:38pm | 27/02/13

      Bank deposits are back by the taxpayer, up to $250k. So if you’ve got $1m in to deposit you’d have to spread it around 4 banks at least.

      Plus I’m 99% confident the taxpayer will be handing over their money to banks if there’s a depression or some such.

      Independent my arse.

    • Ben Trim says:

      01:09pm | 27/02/13

      Finally something relevant and credible Jessica. The large financial institutions have a massive slice of life insurance and financial planning. Advisers that work there are generally limited to a small list of approved products. Independently office AFSL’s on the other hand can have very open approved products lists giving advisers and their clients greater access to more options . The message? Don’t deal with a bank for these products see a adviser like myself who works with/for an independently owned AFSL.

    • Philosopher says:

      04:15pm | 27/02/13

      We need a regulated bank system with a Glass-Seagall type Act. We also need to ban the dealing in derivatives for any Australian bank.  All the big fours have massive exposure to derivatives and we could be bankrupted as a nation by them as close as this year.

    • Bolverk says:

      06:08pm | 27/02/13

      All of these ownership structures are public knowledge, and some (particularly Bankwest and St George) were high profile news stories in their time. Stupidity is no grounds for complaint.

      Politicians constrantly telling people to ask for a better deal is immensely unhelpful, and one of the simplest ways to improve popularity by doing nothing at all. The vast majority of lenders have identical fixed home loan rates at the moment. Without a cheaper competitor in comparison, none will offer additional discounts for average loan sizes.

      Much financial journalism is equally irresponsible. By law, mortgage brokers must declare commission rates, and can readily provide a comparison between all lenders that they deal with. For this reasos, differences are incredibly negligible. In this context, it is very difficult to justify a claim of conflict of interest. Had you spoken to any one of the 13,500 brokers mentioned in your article, you would have found this out very easily.

    • mikem says:

      06:57pm | 27/02/13

      The banks can and do gouge us because they control the market.  They thumb their nose at us and the government can do sweet FA about it.

 

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