In a letter to the Treasurer and Chairs of APRA, ASIC and the ACCC yesterday, Bankmecu called for the federal government to deliver on its promise to increase competition and choice in banking for Australian consumers.
The letter, endorsed by several CEOs of Australian mutuals, raises the need for greater transparency when it comes to the multi-brand strategies being pursued by the country’s major banks.
Bankmecu’s managing director, Damien Walsh, says there’s growing concern that the major banks are creating a “veneer” of competition through their various sub-brands and says consumers should expect greater disclosure of the facts.
“What many consumers don’t know is that if they have deposits adding up to more than $250,000 spread across a bank and its various sub-brands - for example with Westpac, St George, Bank of Melbourne, BankSA and RAMS – they are only protected up to the $250,000 limit.”
The current Financial Claim Scheme protects deposits of up to $250,000 per customer per Authorised Deposit Taking Institution – wholly owned sub-brands which are not separate banking institutions.
Walsh says the government’s on-going $250,000 deposit guarantee continues to be an invaluable measure which has strengthened consumer confidence in the country’s financial institutions.
“However there is no evidence that the details of how this deposit protection applies across bank sub-brands is being disclosed to consumers by the relevant banks, nor is the information readily available on consumer or regulator’s websites.”
Walsh says a survey conducted by Bankmecu last week showed one in four people thought deposits over $250,000 held in banking sub-brands would be guaranteed.
“Nearly 50% didn’t know.”
The letter to the Treasurer follows a Senate Committee report released last week, which suggested that competition in the banking sector had been unduly eroded in the name of stability following the GFC and called for an independent inquiry into the banking sector.
“We have also asked the Treasurer to require banks to prominently disclose ownership of their wholly owned subsidiary sub-brands in all advertising.”
Walsh says the government has already set a precedent for helping consumers make informed decisions by requiring financial institutions to publish comparison interest rates alongside the offered rate on loans.
“These are two simple steps the government can take to deliver on its promise to ensure that there is greater competition in the Australian banking market by helping consumers to make informed decisions about their banking.”