Swan’s banking reforms under fire

This weekend Mr Swan outlined his banking package to the Senate which included measurers to allow banks to tap into the $1.2 trillion superannuation sector to raise funds, an extra $4 billion investment in the residential mortgage backed securities (RMBS) scheme and a national advertising campaign that intends to encourage disgruntled customers to switch banks.

In addition, the package also singled out banks for tough new laws against price signalling and banned exit fees on all new mortgages from 1 July 2011.

While some industry pundits were largely happy with the package, others have voiced their dissatisfaction.

Vow’s incoming chief executive officer Tim Brown told The Adviser that the proposed package did “little to simulate competition”.

“This pacakage doesn’t treat the heart of the competition crisis,” Mr Brown said.

“Removing exit fees will only hurt non-bank lenders – it will render them uncompetitive, which defies exactly what the package intends to do.

“Non-banks do not have the ratings to compete with the majors in other areas, including price. What the government needs to be doing is looking overseas to see what intervention programs have helped stimulate competition abroad. The Canadian RMBS scheme has been very successful and it is one we could employ here.”

Mr Brown said the government competition package would only help move the profits “around the big four”.

However, despite Mr Brown’s comments, it seems not everyone is entirely unhappy with the banking reform package.

FirstMac managing director Kim Cannon said he welcomed the announcement of an additional $4 billion investment to support the RMBS market.

“I hope a significant proportion of the additional $4 billion investment will be directed to non-ADIs,” he said.