Lack of competition contributed to ‘crisis’ in financial sector

In his address to shareholders ahead of Bendigo and Adelaide Bank’s annual general meeting (AGM), chairman Robert Johanson stressed the need for enhanced market competition in the banking sector.

Mr Johanson expressed support for the findings of the Productivity Commission’s review into competition in the Australian financial system, which concluded that there needed to be more of an effort from regulators to enhance competition.

The chairman also claimed that a “lack of competition” in the sector has contributed to the misconduct identified by the financial services royal commission.

“The [review] by the Productivity Commission into competition in financial services has not attracted the same headlines as the [financial services royal commission], but its analysis of the harm to the Australian economy as a result of the competitive disadvantage suffered by non-major banks and service providers is, we think, very important,” Mr Johanson said.

“Indeed, we would say that one of the fundamental causes of the current crisis in financial services in Australia is the lack of true competition in Australian banking that has allowed the major banks to focus so much on shareholder returns at the expense of customers.”

Mr Johanson claimed that greater competition would help rebuild trust in the sector, amid research from Deloitte and Roy Morgan which reported a decline in public sentiment towards the sector.

“If trust in banking is to be restored, it is crucial that organisations with different objectives and standards are able to compete on a level playing field and customers can choose accordingly,” the chairman continued.

The Bendigo chairman was also critical of what he has perceived as operational uniformity in the banking sector, which he claimed has “relegated” customer interests.

“It is also important that banks of different sizes appealing to different markets and segments are encouraged and that they are able to compete. It has been said that in Australia we really only have one major bank; it just operates under four different colours,” Mr Johanson added.

“The regulatory and market pressures to size and business model, where everyone follows the same fashion into and then out of different businesses, shows I think how customer interests have been relegated or forgotten.

“If there is only one model of what defines a bank, there is no need to focus on different customers and their individual concerns.”

He concluded: “We will be working to ensure the reforms proposed by the Productivity Commission to promote competition are implemented.”

[Related: Give the ACCC a competition mandate: PC]