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IT WAS a less than stellar reception that met the December release of the federal government’s long-awaited banking reform proposal.
Industry pundits labelled the measures “poorly thought out” and a “knee jerk reaction” to the lack of competition in the mortgage lending space.
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Under the reform proposal, credit unions and building societies would have the ability to issue covered bonds, while exit fees on new mortgages would be banned.
Removing exit fees, however, would do nothing to solve that core issue of the lack of competition.
Non-bank lenders would struggle to make ends meet, which would render them uncompetitive.
When Vow’s incoming new chief executive officer, Tim Brown, spoke to The Adviser in December, he said the government package would only help to move profits around the Big Four.
Just one day after the proposals were released, investors poured more money into the Big Four, delivering a stinging rebuke to the government’s package.
Indicating shareholder relief that the reforms would not curb growth, Westpac’s share price climbed 1.46 per cent, while NAB enjoyed a 1.45 per cent increase, Commonwealth Bank shares rose by 1.21 per cent and ANZ’s by 1.13 per cent.
Perhaps the only good thing non-bank lenders were able to take away from the reform package was a guaranteed additional $4 billion investment in the government’s Residential Mortgage-Backed Securities scheme.
But while this particular injection of government funding will certainly be welcomed, there is a lot more that could be done.
A government genuinely committed to injecting competition, not just funds, into the marketplace needs to educate borrowers as well as back the non-bank sector. Years of bank propaganda need to be undone and this will take time and money.
Perhaps our political leaders might consider a government national advertising campaign that seeks to educate and inform Australians about the non-bank sector as a whole, rather than just the benefits of switching lenders – as the government suggested in the reform package.
A sophisticated campaign could steer well clear of clumsy bank bashing, seeking instead to promote AOFM support for smaller lenders, the critical role they play in keeping the lending industry honest, and the stability of the sector, post-GFC.
Unfortunately, with the abolition of exit fees at the forefront of the government’s mind, it would appear confusion in Australia about non-banks goes right to the very top.
Jessica Darnbrough
Editor
