A setback for the big four
(27 April 2011 – Australia) A senate inquiry into banking competition will urge the government to resist calls for stricter regulation of the big lenders and focus on increasing funding for smaller rivals.
The inquiry examined overseas schemes that help small banks and credit unions by invigorating the ailing residential mortgage-backed securities market.
Despite evidence that the big four have tightened their grip on the home-loan market, the inquiry will reject calls for regulation to stop banks raising mortgage rates beyond official changes.
During the inquiry, which began in October, the Greens and the Australia Institute pressed for legislation requiring banks to offer mortgages with interest rates that only moved in line with Reserve Bank changes.
After hearing directly from bank chief executives and senior regulators, the inquiry's main recommendations will instead focus on removing impediments to rivals of the big four.
One such move expected to receive the committee's recommendation is fast-tracking the removal of interest withholding tax, which is levied on banks that borrow offshore.
Branches of foreign banks say the tax is a drag on their competitiveness.
The government has said it will phase out the tax from 2013-14, but it is believed the report will advise the government to consider cutting the tax more quickly.
Treasury told the inquiry it would cost the budget A$750 million a year to phase the tax out from July.
Despite evidence that the big four have tightened their grip on the home-loan market, the inquiry will reject calls for regulation to stop banks raising mortgage rates beyond official changes.
During the inquiry, which began in October, the Greens and the Australia Institute pressed for legislation requiring banks to offer mortgages with interest rates that only moved in line with Reserve Bank changes.
After hearing directly from bank chief executives and senior regulators, the inquiry's main recommendations will instead focus on removing impediments to rivals of the big four.
One such move expected to receive the committee's recommendation is fast-tracking the removal of interest withholding tax, which is levied on banks that borrow offshore.
Branches of foreign banks say the tax is a drag on their competitiveness.
The government has said it will phase out the tax from 2013-14, but it is believed the report will advise the government to consider cutting the tax more quickly.
Treasury told the inquiry it would cost the budget A$750 million a year to phase the tax out from July.
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