The Financial System Inquiry has handed in its interim report, and has claimed lending competition in Australia is healthy.
The inquiry, chaired by former CBA
chief executive David Murray, has claimed that most areas of the Australian financial system are operating effectively. While the inquiry said the number of players in the financial services sector has contracted since the Wallis Inquiry, it claimed the industry was still competitive.
"On balance, the Inquiry considers that the banking sector is competitive. The net interest margins of the major banks are around historic lows, and their average return on equity is comparable to those achieved by other large Australian companies," the report said.
But the report did note that the level of competition varied across individual banking markets, and that large banks had a funding advantage over smaller players.
The report also noted that the securitisation market was "dislocated" by the GFC.
"Since then, the market has started to recover, although not back to pre-GFC levels," the report said.
The Inquiry is now calling for submissions about the "costs, benefits and trade-offs" associated with the government providing direct support to the RMBS market.