An industry association has called on the Turnbull government to allocate funds in the May budget to bring forward a planned Productivity Commission review of banking competition.
COBA CEO Mark Degotardi says there is an “urgent need” for well-considered measures to promote competition in banking.
“In its response to the 2014 Financial System Inquiry (FSI), the government agreed to implement periodic reviews of competition in the financial sector,” Mr Degotardi said.
“COBA requests allocation of funding to enable the Productivity Commission to complete the first such review by the end of 2017. The government’s current commitment is to commence, but not complete, such a review in 2017. Given the state of competition in the banking market, we can’t afford to wait.
“The case for an accelerated timetable for the Productivity Commission review is underlined by the House Economics Committee’s November 2016 report that was highly critical of the state of competition in the banking market.”
The House Economics Committee report, released in late November, labelled the big four an “oligopoly” and highlighted the “surprising” lack of regulation that has allowed the majors to harness significant pricing power in the residential mortgage market.
The report noted that the majors increased their oligopolistic powers after the GFC when they purchased a number of their smaller competitors, such as St George Bank and Bankwest.
“The enduring solution to concerns about the banking market is action to promote sustainable competition so that poor conduct is swiftly punished by loss of market share,” Mr Degotardi said.
“An expert review to identify the barriers to a more competitive market and measures to overcome those barriers is sorely needed.”
[Related: Govt inquiry calls for banking tribunal]