Wayne Swan Proposes Banking Reform To Increase Competition
Federal Treasurer Wayne Swan has proposed banking reforms which include government backing for the mortgage bond market and new safety measures which would replace the Federal deposit guarantee. The treasurer is seeking to reform the Australian banking industry by forcing more competition.
Mr. Swan speaking before leaving for a trip to Beijing, warned the Big Four lenders not to underestimated his determination to reform the sector by introducing measures designed to assist their competition and force them to compete.
“It will put pressure on the major banks to behave in a better way and to ensure that their competitors can provide the fierce competition which existed prior to the global financial crisis,” Mr. Swan said.
Mr. Swan said that the financial crisis has had the effect of weakening the smaller regional lenders, and the main challenge was enabling them to obtain cheaper sources of funding.
On Wednesday Westpac reported a whopping 84 per cent gain in full year net profits of $6.3 billion, fuelling public outrage.
Between them, the Big Four lenders have posted $21.7 billion in cash profits for the year, compared with $16.3 billion in the previous year, a combined gain of 33 per cent.
Westpac has so far declined to say whether it intends to follow CBA’s lead in lifting rates in excess of official rate hikes, a move which sparked intense criticism from politicians and members of the community.
Rivals NAB and ANZ have so far also remained silent on whether they intend to undertake similar rate increases.
Mr. Swan denied that that his plans for banking reforms were his attempt to play catch up with his opposition counterpart Joe Hockey’s nine point banking reform plan. He added that he will reveal most of his banking reform proposals next month.
The battle between the government and the Big Four Lenders has intensified, as the government threatens more stringent industry regulation.
“We do live in a society where we do not directly regulate interest rates, so what the government will do in response to this very arrogant action from the Commonwealth Bank is put in place a further raft of reforms that empower consumers and make sure we get the most competitive outcomes, and that’s what we’re going to do,” Mr. Swan said.
Mr. Swan sought to downplay expectations of the government’s ability to control the interest rate policy of the nation’s lenders.
Mr. Swan’s reform proposals are likely to include a number of important initiatives for banking regulation, including how Australia will implement the new Basel 3 regulations and its plans to introduce a new method to assure depositors following the expiry of the existing federal deposit guarantee next October.
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I wonder if Mr. Swan realises that competition in the banking sector means competition to lend more money. That is the business of banking. Lend the most money possible. The “fierce competition” pre GFC was associated with very low standards of lending which only results in instability. Unwise in my opinion.
All this talk of banking reform is superflous under the private central bank monopoly that issues our currency at no cost and charges us interest for the priveledge.