Building societies and credit unions have urged the federal government to act to preserve competition in the banking sector and called for a review of the wholesale funding guarantee and action to resuscitate securitisation.
In a submission to a parliamentary inquiry, the industry body for mutuals Abacus said the government needed to revisit its wholesale guarantee scheme and introduce a flat fee, or at least a flatter fee structure, in order to remove the strong bias that currently favoured the major banks.
“An unintended consequence of the guarantee arrangements is a strengthening of the major banks’ market power,” said Abacus CEO Louise Petschler today.
Credit unions and building societies must pay 1.5 per cent for the guarantee, while major banks pay 0.7 per cent, she said.
“Access to wholesale funding will assist mutual ADIs to put competitive pressure on major banks in the interests of Australian households and small businesses.”
Ms Petschler said the submission also called for action to reinvigorate the securitisation market such as a consideration of a system like the Canadian Mortgage Bond Scheme which has boosted competition in Canada.
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