Even though there are more than 100 banks, building societies and credit unions in Australia, the competitive landscape is dominated by the Big 4 or ANZ, Commonwealth Bank, NAB and Westpac.
Collectively, the domestic assets of even one of these banks swamps the rest of the industry combined.
It’s a situation that makes the Big 4 Domestically Systemically Important Banks (dSIBs) and it’s a situation that makes it difficult for Mutuals to compete, according to their industry body, the Customer Owned Banking Association (COBA).
The AFR reports this morning that COBA has requested the Government put a levy on the Big 4 of as much as $2.2 billion a year in a pre-budget submission.
“Applying a levy to systemically important banks will support financial system stability,” COBA chief Louise Petschler said. “It will recognise the financial benefit the big four receive from their ‘too big to fail’ implicit government guarantee.”
The submission also seeks to have the levy on the Big 4 replace a broader industry-wide levy on deposits that the Government is considering: “By only applying the levy to some authorised deposit-taking institutions, these institutions will find it more difficult to pass the additional costs onto consumers; making it more likely that the costs will be absorbed.”
Competition in Australian banking is dominated by the Big 4, who receive advantages of size and scale as well as the treatment of capital for housing loans under regulations. So a more level playing field would aid Australian banking consumers and the economy.
But it’s difficult to see how a government with free market leanings and a Treasurer telling Australian business that it’s time to stand on your own two feet will want to tax one section of industry heavily to the advantage of another section.
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