Federal Treasurer Wayne Swan has released his long-awaited banking reform package that will see the banning of exit fees on new loans and more support for smaller lenders and credit markets.
The package, announced in Canberra on Sunday, comes after more than a month of strident criticism of the big four banks, after they followed by a 25-basis point official interest rate rise by boosting mortgage rates by as much as 45 basis points.
While the Coalition and the Greens have proposed ways to improve banking competition and crack down on excessive mortgage fees, Treasurer Wayne Swan waited more than four weeks before revealing his plans.
Central to the reform package is a ban on mortgage exit fees on new mortgages, to comes into force from July 2011.
This measure is seen as a crucial way of making it easier for mortgage holders to change lenders when they can get a better rate.
However, exit fees on existing mortgages will remain, although Swan says a crackdown on unconscionable conduct in the banking system may see these phased out over time.
“There's no silver bullet here – the challenges flowing from the global financial crisis can't be solved overnight – but we'll keep working hard to give all Australians a fighting chance,” Swam said
The Government will also:
- Pump another $4 billion into the residential mortgage backed securities market to allow small lenders improved access to credit.
- Empower the ACCC to crack down on so-called price signalling between the banks, where banks may hint to each other about rate rises. Opposition treasury spokesperson Joe Hockey has been a big supporter of this strategy.
- Allow all banks, credit unions and building societies to issue covered bonds, in a bid to encourage more of Australia’s superannuation pools to flow back into the credit market.
- Improve the liquidity and depth of the corporate bond market by allowing Commonwealth Government bonds to be traded.
- Introduce legislation to ensure credit card fees and charges are charged in a “consistent” way.
- Launch a campaign to encourage consumer to better understand their banking rights.
The Government has not taken up the Greens’ suggestion that bank account numbers be made portable to improve the ability of deposit holders to switch banks.
However, Swan will engage former Reserve Bank governor Bernie Fraser to investigate ways to make switching easier.
Swan denied that the Government was attempting to “nationalise” the mortgage market.
“It’s not nationalisation, it’s about making sure people don’t get caught up with these unfair fees. You’ve got to remove these roadblocks in the terms and conditions that don’t allow people to get out.”
He also warned against any attempts by the banks to introduce other fees to make up for the banning of exit fees.
“We are awake to that. We are alive to that.”
While there is nothing specific in the package of the small business sector, Swan says the strategies for improving competition in the banking sector and credit markets will help SMEs.
“Generally making the market more competitive is just as important for someone who has that dream of owning a small business as it is for someone who wants to buy a home.”
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