Non-major banks have mixed reactions to Murray Inquiry

by Julia Corderoy09 Dec 2014
Non-major lenders have mixed reactions to the final report of the Murray Inquiry, after heavy campaigning to investigate recommendations on levelling the playing field in the banking sector.

The four regional banks, Suncorp Bank, ME Bank, BOQ and Bendigo and Adelaide Bank – who jointly made a number of recommendations to the Inquiry aimed at levelling the playing field – have welcomed the recommendation to reduce the gap in risk-weighting of mortgages.

“It is encouraging to see that Mr Murray and the Inquiry committee have acknowledged the need for action on competitive neutrality. The changes proposed on risk-weighted capital applied to major banks would narrow the gap. The Report recommends a 25% to 30% average mortgage risk weight be applied for those banks with advanced accreditation,” Suncorp Bank CEO John Nesbitt said.

The market dominance of the ‘Big Four’ means they currently have 85% of the residential mortgage market. BOQ Acting CEO, Jon Sutton has praised the Inquiry for recognising that this dominance is not in the best interest of Australian consumers.

“It is pleasing the Inquiry has acknowledged the competitive gap enjoyed by the majors needs to be closed and would like to see action taken quickly to address this issue, before the dominance of the Big Four is further entrenched. If that happens, Australian consumers will ultimately be the losers,” Sutton said.

However, the report fell short in levelling the playing field in other areas. Despite the final report recommending brokers to disclose ownership structures, CUA chief Chris Whitehead said the current deficiencies in the disclosure of bank ownership in advertising need to be addressed.

“There is a lack of transparency in the market place, particularly with advertising. It isn’t clear that organisations like BankWest, St George or Bank of Melbourne are all owned by the big banks,” he said.

“Customers who choose these banks clearly want an alternative to the big banks and deserve more transparency around ownership.”

Whitehead also said the report could have done more to address the market distortion that arises from this increasing vertical integration. 

“We want to see a diverse and competitive marketplace across the financial services sector, rather than major players increasing their stranglehold on the consumer.”