CANBERRA: Australia will hold an inquiry into competition in the country’s financial system, following a series of scandals in the banking sector and public allegations against the “Big Four” banks of abuse of market power.
The latest inquiry is part of a number of government measures since last year aimed at alleviating public concerns about the power of the big banks, after revelations of misconduct in the industry.
Australia’s four major lenders – Commonwealth Bank of Australia, Westpac Banking Corp, ANZ Banking Group and National Australia Bank – have come under fire recently following several scams involving misleading financial advice, insurance fraud and interest-rate rigging, as well as for refusing to pass on official interest rate cuts in full.
The four together control 80% of Australia’s lending market and have posted record profits for years. Westpac, NAB and ANZ all reported a rise in half-yearly cash profits this month, taking their total to about A$8.5 billion. CBA will report limited third-quarter figures on Tuesday.
“The high concentration and degree of vertical integration in some parts of the Australian financial system has the potential to limit the benefits of competition…and should be proactively monitored over time,” Treasurer Scott Morrison said in a statement on Monday.
“The Government is committed to ensuring that Australia’s financial system is competitive and innovative. That is why I have tasked the Productivity Commission to hold an inquiry into competition in Australia’s financial system.”
The inquiry will consider the degree of concentration in key segments of the financial system, examine barriers to innovation in the system and look into competition in personal deposits and mortgages for households and small businesses.
The Productivity Commission will commence the inquiry on July 1, and the final report is likely to be presented to the government within 12 months of that, Morrison said.
Last year, the government used its one-seat majority in parliament to avoid a sweeping Royal Commission into banks but later announced a limited inquiry targeting mistreatment of small business customers. The government also beefed up the corporate watchdog’s powers, ordered bank chiefs to make annual appearances before parliament’s economics committee and promised a tribunal to examine citizen complaints.
Australian banks have themselves promised unprecedented reforms to protect consumers and boost transparency, including reviewing sales commissions, supporting whistle-blowers and black-listing individuals for poor conduct.
The Australian Bankers’ Association (ABA) welcomed the review, its Chief Executive, Anna Bligh, said in a statement.
“The inquiry…will provide us with a thorough, robust and credible assessment of competition in the financial system. It adds to the 15 government or regulatory inquiries underway to make banking better for customers,” she added.