Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Australian watchdog says bank 'oligopoly' needs more reform

Published 10/14/2016, 02:24 AM
Updated 10/14/2016, 02:30 AM
Australian watchdog says bank 'oligopoly' needs more reform

Australian watchdog says bank 'oligopoly' needs more reform

By Byron Kaye and Tom Westbrook

SYDNEY (Reuters) - Australia's major banks are an "oligopoly" and must undertake reform to boost confidence in the financial system following a series of scandals that have fueled calls for a sweeping judicial inquiry, the corporate regulator said on Friday.

"We're in a market that is frankly an oligopoly," Australian Securities and Investments Commission (ASIC) Chairman Greg Medcraft told a parliamentary hearing dominated by questions about how to improve policing of the finance sector.

"Work is needed to restore trust and confidence," he said, while conceding that the banks had taken "important steps in the right direction".

The firm language will be read as a warning to the "Big Four" banks - Commonwealth Bank of Australia (AX:CBA), Australia and New Zealand Banking Group (AX:ANZ), Westpac Banking Corp (AX:WBC) and National Australia Bank (AX:NAB) - that regulators are watching how they respond to public anger over the perception that they abuse their market power.

The four lenders together control four-fifths of the industry in Australia and have enjoyed years of record profits thanks largely to their dominance of the mortgage market.

But a string of scandals including alleged interest-rate rigging, poor financial advice and insurance scams has exposed them to allegations that their power has fostered a culture of exploitation and unaccountability.

In appearances before another parliamentary committee last week, bank chiefs expressed regret over any wrongdoing but characterized the problems as aberrations.

They have rejected calls from whistleblowers and the opposition Labor Party for a powerful Royal Commission inquiry, and have the backing of the ruling Liberal Party.

Medcraft and Australian Prudential (LON:PRU) Regulatory Authority Chairman Wayne Byres, who also testified on Friday, said forcing banks to increase transparency in relation to advertising mortgage products would improve competition, as would cutting penalties for borrowers who changed lender.

Byres offered a brighter assessment of the sector, however, suggesting it was generally more compliant with regulations since the global financial crisis and more proactive in weeding out poor practices.

"Having got the message they need to do better, they are looking harder for instances of where things have gone wrong and where people have been mistreated," he said.

Australian Competition and Consumer Commission Chairman Rod Sims said that while the banking industry was "highly concentrated" and "a concern", other sectors of the economy, like energy, were even less competitive.

Australian Bankers' Association Chief Executive Steven Münchenberg said in a statement before Medcraft spoke that the industry was implementing "extensive reforms".

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.