Michael Peters

With the bank reporting season in full swing, perhaps the federal government should recommend legislation that would increase banking competition.

There has not been a greater failure of competition policy than in this sector. Both sides of the political spectrum talk about competition, however both appear to be hesitant to actually take the hard decisions.

It’s a credit to the sector to have such vibrant banks in a world littered with insolvent banks, post-GFC. However the success and the essential role played by the sector should not make it immune from competition policy – for example the recent move to create some portability of home loans and to regulate credit terms have had very little impact.

The Senate inquiry heard submissions that made it clear that Australia should not expect a return to the relatively benign credit environment that prevailed before the crisis.

The success and the essential role played by the sector should not make it immune from competition policy. The ‘too big to fail’ reason should not be the default position of any policy. Supervision of the sector should have a common objective: a viable, efficient and accessible banking sector. The Senate inquiry is an opportunity to tell us more than we know. It is a unique chance to put into place a road map towards competition we can all bank on.

As business owners will readily tell you, the cost and terms of credit are skewed by the structure rather than the dynamics of any market. With the introduction of Basel III, the mutual banking sector will once again be overshadowed by rules and regulation which are increasingly having a less than positive effect on competition within the sector.

Michael Peters is a Lecturer in Business Law and Taxation at the Australian School of Business.