The Greater Building Society has echoed calls today from the Customer Owned Banking Association (COBA) that Financial System Inquiry must scrap billions of dollars in taxpayer subsidies for the big four banks and end their “age of entitlement”.
COBA made the comments as it released its submission to the inquiry, highlighting the unfair advantages in the system that limits real competition for consumers.
“Australians may be surprised to learn that they are subsidising the operations of the nation’s four biggest banks,” COBA CEO Louise Petschler said.
“The current financial system gives some of the world’s most profitable banks billions of dollars in funding advantages for free.”
COBA today said current banking rules are making the big banks bigger, which puts the Australian economy at greater risk and leaves consumers worse off.
“The FSI must look at this most fundamental problem,” Ms Petschler said.
“Our key recommendations to the FSI panel will help generate genuine competition and choice for consumers and deliver better prices, customer service and innovation.”
COBA’s proposals for consideration include:
- A levy on the big four to pay for the taxpayer funded subsidy they receive;
- Better consumer information so Australians make informed banking choices;
- A banking regulator more focused on fostering competition;
- A tax cut on deposits to lift national savings;
- Equitable treatment and recognition of the customer owned banking model
In its submission, COBA has addressed the problem of “too big to fail” banks, a situation where the major banks in Australia are likely to be bailed out by the government in a crisis.
COBA agrees with banking regulator APRA, who said this represents a large implicit public subsidy of a private enterprise. A report released last month by Morgij Analytics estimated the subsidy to be worth $2.5 billion.
“The FSI gives us a chance for a simpler, fairer, sustainable banking system,” Ms Petschler said.
“Too big to fail bank market dominance is a serious risk to the Australian economy.
“COBA is taking a pro-consumer stance. These reforms will allow smaller players to compete fairly and ultimately give Australians a better banking deal.”
“Customer owned banking delivers diversity and supports system stability.”
“With 100 institutions and more than 4 million customers, the sector is already taking up the challenge to the major banks.
“But true competition can only be achieved if barriers and subsidies are removed, so smaller players don’t have to compete with one hand tied behind their backs.”
COBA today released detailed supporting analysis in its submission including material from the IMF, APRA and domestic and global research to support the case for change.