Bank reforms draw mixed reviews
BANKING reforms introduced by the Federal Treasurer Wayne Swan this week have drawn mixed reviews.
The most-publicised change has been a ban on exit fees for new home loans, which will be introduced for new mortgages from July 1, 2011.
Banks must also provide fact sheets so borrowers can compare lenders.
Former Reserve Bank governor Bernie Fraser will be asked to investigate bank account number portability and the Australian Competition and Consumer Commission will be able to prosecute banks which ‘signal’ rate rises to other banks.
The Australian Prudential Regulation Authority will make it easier for credit unions and building societies to become banks and a new ‘government-protected deposits’ symbol will be introduced. The financial claims scheme guarantee for deposits will be continued and the Federal Government will invest another $4 billion in mortgage-backed securities.
Lenders will be allowed to issue covered bonds and retail investors will be able to trade government bonds.
Holiday Coast Credit Union CEO Neville Parsons welcomed the banking reform package and encouraged consumers to shop around.
“There are some real positives for credit unions and building societies in the Government’s announcement and Holiday Coast Credit Union is ready to compete with the banks with this package giving a welcome boost to our efforts,” said Mr Parsons
“The proposals to make switching accounts easier will make important contributions to raising consumer awareness there is choice in banking.”
Newcastle Permanent CEO Terry Millett said it already offered vigorous competition to the major banks.
Competition and Consumer Law expert Associate Professor Frank Zumbo from the University of NSW said the package was a missed opportunity to rein in the big banks’ market dominance and inject real competition into banking.
“The package fails to address the need for consumers to be able to easily switch banks,” Mr Zumbo said.
“While account number portability raises technical challenges and may never be implemented, Swan could have given borrowers an immediate ability to transfer lenders mortgage insurance on a loan between financial institutions.
“Another glaring omission is Swan’s failure to require the ACCC to formally monitor the four big banks so as to put the competition spotlight on their interest rates and fees.”