The Customer Owned Banking Association is calling on the federal government to pursue the Financial System Inquiry’s recommendation against a deposit levy.
The group claims the government is already sending signals that it is walking away from the FSI’s reform blueprint and has urged it to reconsider.
“We are seeing an apparent willingness to reject the FSI’s recommendation against a deposit levy and suggestions that implementation of the capital recommendations will be delayed,” COBA chief executive Mark Degotardi said.
“The suggestion that a deposit levy may be needed because of delays in strengthening capital settings flies in the face of recommendations one and two of the FSI.
“These recommendations on bank capital are the top-priority recommendations of the FSI, and the government should be sending a clear message to APRA to get on with implementing them.”
Mr Degotardi noted the deposit levy will create risks to the stability of, and competition in, the Australian market.
“A deposit levy is bad news for competition in banking as it hits the major banks’ smaller competitors much harder than it hits the majors,” he said.
“The deposit levy is a mosquito bite for the four major banks, but it is a python squeeze for the smaller players in the banking market.”