Retail banks - champing at the bit?

When many people come to take out a loan or a mortgage, their first inclination might be to turn to their own bank. On shopping around, they could find that better deals lie elsewhere.

It is in such places that retail banks can often be found. However, as the global credit crunch sinks its teeth into the financial markets, many such lenders have found themselves marginalised.

That, though, could be about to change, the Sydney Morning Herald reports.

Nicholas Hossack and David Bell of the Australian Bankers' Association have been briefing the government in an enquiry into banking competition - and it is their opinion that mortgages offered by non-banks will return.

"Eventually at some point in the future when the credit crisis resolves itself and these wholesale funds are available, those institutions with business models that rely on wholesale funds will come back into the market," said Mr Bell.

He added that it is difficult to give a definitive timescale for when this may be, but predicted that a restoration of the financial markets is "at least two or three years away".

Mr Hossack meanwhile cited the example of a non-bank lender that resumed advertising this month during an easing in the short-term cost of funds.

The opinions follow a report from the International Monetary Fund which hailed the banking systems and fiscal policy of Australia as strong enough to help see the nation through the stormy waters hitting the financial shores of other countries.

However, the organisation warned that institutions ought to be on guard against the risks related to the housing market and wholesale funding.

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