Banking Review

Competition takes a Swan dive…

OPINION

In January 2009, on the back of the worst financial crisis many had lived to experience, we asked if the industry was about to see the death of competition.

The removal of St. George and BankWest as serious competitors to the major banks delivered unprecedented market share to the Big Four. It was allowed to happen on the current government’s watch, who at the time defended the ACCC’s approval of the big banks swallowing their smaller rivals in the name of financial stability.

Two years on, Treasurer Wayne Swan has decided to make the banks pay with a raft of measures designed to boost competition.

But when broken down, many of these measures are token at best, and at worst likely to benefit the major banks more than their smaller competitors.

Noticeably absent from the measures is a mandate for Australia Post to take on the banks (Coulda been a contender), with the government sticking to the Residential Mortgage Backed Securities market to boost liquidity.

The mutual sector is hoping the new measures will at least bring it in line with the major banks in the trust stakes (A mutual playing field), but it has a long way to go to really start impacting the market share of the majors.

And it seems almost every big business, in banking or otherwise, is against the government’s proposed changes to the Trade Practices Act as part of its attempt to crack down on price signalling (Signalling under fire).

Probably the most interesting of the measures is Swan’s decision to hire former Reserve Bank governor Bernie Fraser to investigate account number portability. Last week, the Reserve Bank of Australia admitted account number portability could improve competition to the extent that it could eliminate the need to have direct debit and direct credit payments redirected to a new account when a customer changes financial institutions.

Bernie Fraser could save himself a lot of time by talking to the banks about project Mambo, which would essentially allow portability without the need for major structural change.