Treasury Secretary Says Australian Financial Services Highly Competitive

Post by Sharat on March 16, 2010 · Under Australian Economy, Business News, banking, home loans, interest rates, mortgages · Comment

The Federal Treasury believes that the financial services industry in Australia remains highly competitive, despite the capturing of a large proportion of market share by major lenders in the aftermath of the financial crisis.

Secretary of the Treasury Ken Henry on Monday said that though some financial institutions continue to face funding difficulties, a large number of smaller and regional lenders including credit unions and building services offer standard variable rate mortgages at a 100 basis points less than the major lenders.

“As global financial markets continue to recover, we expect to see competitive pressure in the banking sector rebuild,” Dr. Henry told a business conference in Canberra.

Dr. Henry added that the securitisation markets re-opening would further help smaller financial institutions who also needed to deal with pressure on their balance sheets stemming from bad debt, which had resulted in some lenders scaling back their lending activities.

Dr Henry also expects international lenders to rebuild their presence in the country, as the situation in their domestic markets stabilised.

“It is these smaller players that have generated the most competitive pressure in Australia’s banking sector,” he said.

Dr. Henry acknowledged that the major lenders had captured significant share of the mortgage lending market, which had increased from 60 per cent prior to the financial crisis, to a whopping 80 per cent after the financial crisis. Mr. Henry made the point that market remained competitive however, with 110 providers of more than 2070 mortgage products.

Dr. Henry illustrated his point with a report from the OECD which suggests that an Australian financial services continues to remain competitive, with foreign lenders accounting for 30 per cent of business credit.

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