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Connexus : Issue 42
"We'll try to get consumers who are feeling frustrated -- but who feel like they don't have any other choice -- to do something constructive with some of that fr ustration and join the discussion about the kind of banking system that they’d like to see.” Review overdue One of the most signifcant elements of the Balance Banking campaign is the call for an independent banking review amid calls from shadow treasurer Joe Hockey for a reassessment he has dubbed "son of Wallis", a reference to businessman Stan Wallis's banking review in 1996-97. Whitehead says the fnancial world has changed dramatically in the past two decades. "Competition has substantially reduced and the big banks are really abusing their market power," he says. “It is an oligopoly and attempts to produce competition have largely gone by the wayside after the GFC. So it is time for a relook and a reset of competition policy.” Teachers Mutual Bank chief executive Steve James agrees that a well-considered, independent banking inquiry is overdue. “It would help the smaller fnancial institutions like us to fourish. During the GFC the banking landscape in Australia was stifed from true competition and it now needs a long-term review of the banking system for a better outcome for all consumers in Australia.” People's Choice Credit Union managing director Peter Evers echoes the sentiment. "I'm pretty certain the major banks will say, 'No, no, no, too many inquiries, too much change, too much regulation – we don’t want any of it’. "Why would they want it? They've got 80 to 90 per cent market share. They don’t want their club disrupted. They don’t want their cosiness challenged. So it’s up to us, the population and the industry at large to pursue such an inquiry.” Desired outcomes The Balance Banking campaign and any subsequent banking inquiry is designed to deliver a range of results, including creating a more level playing feld. Whitehead argues, for example, that the big banks, “in essence get a free kick on funding costs”. He notes that government support for the majors, because of the belief that they are too big to fail, "has been estimated to be worth about 0.2 per cent in terms of their funding costs relative to smaller players”. More can be done to close the gap between funding costs for large and smaller institutions, says Whitehead, who has made a case for additional government purchases of residential mortgage- backed securities through the Australian Offce of Financial Management. "So, for instance, the acquisition of B-notes by the AOFM and different settings with regard to capital relief would all favour further competition.” Greater competition would also allow a better offering to the market, says bankmecu managing director Damien Walsh. "If only we could break that psychological barrier of people just defaulting to the four majors,” he says. “Mutuals are out there to provide a better product and better ser vices and pricing than you can get from the majors. But we’re just being squeezed out.” People see that there's plenty of competition in the market, unaware that the four majors own a lot of those sub-brands... Steve James, chief executive, Teachers Mutual Bank CoverStory www.abacus.org.au 31