Australia’s banking organisations have responded to the release of the draft report from the Productivity Commission (PC) on competition in Australia’s financial sector, looking closely at issues affecting both their members and Australian bank customers.
The draft report, released 7 February 2018, looked at several key points of concern to Australia’s banking sector, including financial services being offered to Australians growing too complex to easily understand, and customer loyalty going unrewarded.
Competition brings benefits, reforms already underway
The Australian Bankers’ Association (ABA) said the PC report recognises that Australia’s strong and dynamic banking system fosters innovation, citing examples such as tap and go payments, safe and quick transfer of funds and quick and easy loan approvals.
“Competition in the industry, as the draft report clearly states, has delivered tangible benefits to the Australian customer. This backs up findings of previous inquiries such as the Financial System Inquiry which recommended certain reforms which have since enhanced competition in the industry.” – ABA
According to the ABA, Australia’s financial industry is already undergoing major reforms, which should address many of the issues identified in the PC draft report, as well as others.
With specific regard to the mortgage broking industry, the ABA said that it intends to work alongside the Combined Industry Forum to implement “changes that make a meaningful difference to customers while supporting a vibrant mortgage broking industry.”
New competition advocate needed
Customer Owned Banking Association (COBA) CEO, Mike Lawrence, welcomed several key findings of the draft report, including that competition has suffered due to the market power wielded by Australia’s major banks, allowing them to pass on cost increases and set profitable prices without losing market share.
“The PC is highly critical of APRA’s “excessively blunt” macroprudential intervention into the home loan market, noting that the intervention has ignored or harmed competition and has seen a decline in competition from smaller lenders in the home loan market.”
“We particularly welcome the PC’s finding that more nuance is needed in the design of APRA’s prudential measures, including directions to ADIs and risk weights for setting regulatory capital levels.” – COBA CEO, Mike Lawrence
COBA also agreed that the advocate for competition in the financial sector should be the Australian Competition and Consumer Commission (ACCC) or the Australian Securities & Investments Commission (ASIC), and that the role of the Australian Prudential Regulation Authority (APRA) and Reserve Bank of Australia (RBA) should remain focused on maintaining financial stability in the market.
Another recommendation endorsed by COBA was for ASIC to develop an online tool to inform and empower Australians about the home loan market.
Both ABA and COBA said they intend to analyse the draft report in detail and consult with their members before making further submissions to the final PC report, expected in July 2018.