Banking more competitive than 90s: RBA

Australia's central bank chief says banking competition is actually better now than
it was in the mid-1990s as the government moves to tackle the power of big lenders.
Smaller lenders have struggled to attract customers since the onset of the global
financial crisis.
But Reserve Bank governor Glenn Stevens says borrowers have more choice now than
they did 15 years ago, when non-bank mortgage originators began taking on the
established players in the home loan market.
His comments come a day after the government unveiled measures designed to improve
banking competition, including a plan to ban exit fees on new standard variable
mortgages from July 2011.
"The overall availability of finance to purchase housing in particular seems to be
adequate," Mr Stevens told a Senate inquiry in Sydney on Monday.
"The market ... remains more competitive than it was in the mid-90s and borrowers
have access to a larger range of products."
The National Australia Bank has weighed into the competition debate, with chief
executive Cameron Clyne arguing more choice was not necessarily better for
consumers.
"It's actually nothing to do with the number of players," he told the same inquiry.
While the big banks have tightened their grip on the mortgage market, Mr Clyne said
the difference between their highest and lowest standard variable rates was actually
at the widest level in two decades.
When it came to mortgage rate increases, Mr Clyne said the major banks were better
off moving out of synch with the Reserve Bank of Australia's (RBA) cash rate, as
lenders continued to battle high funding costs.
"If the banks continue to move in line with the RBA, up or down, then we are
continuing to compound the view that in fact our funding is related to those moves
in the cash rate," Mr Clyne said.
Treasurer Wayne Swan has argued the government's competition reforms would lead to
lower interest rates "over time" but Mr Clyne said it was too early to tell.
Shadow treasurer Joe Hockey has declined to say if the coalition would back Labor's
legislation next year.
"I want to see the details of how the government is going to prevent the banks from
passing on the abolition of exit fees to other areas such as increased application
fees," he told Sky News on Monday.
A proposal to give the Australian Competition and Consumer Commission (ACCC) the
power to crack down on price collusion among bank executives has been slammed by the
watchdog's former chief Allan Fels.
"It's not going to change the basic situation," he told ABC Radio on Monday.
"The global financial crisis has done a great deal of harm to competition in the
banking industry."
His successor at the ACCC, Graeme Samuel derided the comments of Professor Fels, who
argued the merger of Westpac and St George in 2008 was to blame for the lack of
banking competition.
"With great respect to my predecessor Allan Fels ... there are some other academics
that are out there, putting forward these superficial comments without analysis at
all," he told Sky News.
"They grab some headlines in the media but frankly they don't help the debate."