Our CEO Don Magins says consumers need to be made aware of who owns who in the banking sector. Some consumers may be surprised to learn their bank is owned by a major bank.
Australia’s customer–owned financial institutions are calling on the Government and regulators to ensure there is transparency for consumers regarding who owns who in the banking sector as well as the extent of protection under the Government’s $250,000 Deposit Guarantee.
Consumers are being misled into thinking there is more competition than is actually the case.
During the global financial crisis two of the major banks acquired a number of competitor financial institutions. Westpac acquired St George Bank, RAMS, Bank of Melbourne and Bank SA. Commonwealth Bank acquired Bankwest.
These financial institutions had been strong challengers to the big four banks and they marketed themselves as such. Since acquisition, these brands have not changed this marketing. To the consumer, it would appear that these challenger brands are still in competition with their new owners.
To be fair, sometimes these sub-brands have different pricing strategies. The problem is that the major banks have made no effort to clarify that these brands are owned, and controlled, by them. The consumer is probably not aware that they are, in effect, the customer of a major bank.
We are not asking for this practice to be banned. There are many organisations who run multiple brands. We are requesting that the “ownership” of these sub-brands be made very clear to the consumer. As the head of Credit Union Australia, Chris Whitehead, said in a strongly worded letter to the Australian Securities and Investment Commission (ASIC), we are calling for the holder of the operative Australian financial services licence to feature prominently in any advertising and not be buried in fine print. Mr Whitehead correctly points out that consumers looking for an alternative to the major banks should be able to be confident that they have found one. Customer-owned financial institutions, such as The Greater, are viable alternatives to the major banks, but our efforts to be a stronger competitive force are being hampered by the confusion caused to consumers by the lack of clarity in ownership of bank “sub brands”.
One of the measures the Government put in place during the global financial crisis was to guarantee the deposits of all Australians held in financial institutions. One little known point about the Guarantee is that is only applies to the licensed entity.
So a customer of The Greater has up to $250,000 of their deposits with us guaranteed by the Government. Say a consumer who has more than $250,000 in deposits decides to spread them across several financial institutions to ensure all of their money is guaranteed. If they spread them across Westpac, St George and Bank of Melbourne, still only $250,000 in total is guaranteed because they are in effect the same bank. This is not being clearly disclosed to consumers.
Another mutual financial institution recently warned consumers to beware of major-bank "wolves" dressed in sheep's clothing.
These are just two more examples of how the playing field is not level for the fifth pillar of banking as it tries to inject some real competition into the banking sector for the benefit of Australian consumers. We need a full independent inquiry into the banking sector to level up the playing field, which will benefit consumers.
Have you just realised that, to your surprise, your bank is owned by a major bank? Please share your story or comments on this issue below.