Govt accused of copying UK banking ‘playbook’

In the United Kingdom, a bank levy was announced in direct response to the UK taxpayer-funded bail-outs of Lloyds TSB, HBOS and Royal Bank of Scotland in 2008/09.

“It was not simply a function of the UK government’s desire to fill a long-term revenue hole in its budget,” Pepper’s former co-group chief executive Patrick Tuttle told Mortgage Business.

“The government appears to be taxing the big banks without giving more careful consideration to the significant differences between the Australian and UK banking and mortgage lending markets, particularly the very different level of distress which was felt in the UK in 2008 (at the height of the global financial crisis) when many of these measures were first implemented,” he explained.

“As for the bank levy, it should simply be called out for what it is, a tax on a highly profitable sub-set of five Australian banks to help fast-track a future budget surplus,” Mr Tuttle said.

“Despite attempts to retro-fit an underlying social purpose, the levy will not in any way ‘level the playing field’ between the major banks, the regional banks, smaller ADIs and non-bank financial institutions,” he said.

In addition to the bank levy, Mr Tuttle argues that excessive intervention on macro-prudential controls, government over-reach into bank corporate governance, coupled with “unwarranted additional regulation of the non-bank sector”, could inadvertently trigger a “severe housing market downturn”.

The former Pepper boss also believes these measures could lead to a reduction in consumer choice and confidence, and in some cases a lack of access to credit for certain borrowers.

“This is a recipe for disaster,” he said.

[Related: APRA controls on non-banks could trigger 'credit crunch']