The federal opposition’s ‘nine point plan’ to reform the banking sector has received the backing of the peak small business body.
Last week, opposition treasury spokesman Joe Hockey unveiled the ambitious plan at the Australian Industry Group Annual National Forum.
In concluding his address, Hockey said the proposed banking policies “will make our banking system stronger and safer, and better able to withstand the financial tsumani when it next comes.”
The coalition’s nine-point plan is:
- Give ACCC power to investigate collusive power signalling.
- Encourage APRA to investigate whether major banks are taking on unnecessary risks in a bid to maximise short-term returns that conflict with the preferences of those that backstop the system, namely taxpayers.
- Formally mandate RBA to publish regular reporting on bank net interest margins, returns on equity and profitability to determine whether major banks are extracting monopolistic profits.
- Investigate David Murray’s proposal for Australia Post to make its 3,800 branches available as distribution channels for smaller lenders.
- Ask Treasury and RBA to investigate ways to further improve liquidity of residential and commercial mortgage backed securities markets, which are an alternate source of funding for smaller lenders, including consideration of Coalition proposal to extend Government’s credit rating to AAA rated commercial paper in those markets to improve liquidity.
- Explore further simplification of Financial Services Reform Act, to make getting out and doing business easier and simpler.
- Direct APRA to explore whether risk-weightings on business loans secured by residential properties are punitive.
- Commission a resolution to debate about whether banks should be able to issue “covered bonds”, in same way other jurisdictions allow their banks to, which provides a more affordable line of credit.
- Wrap up all of these developments into a full review of the financial system.
Council of Small Business of Australia executive director Peter Strong says the council is calling on banks to publish data showing how many small businesses are being denied access to credit and why.
He’d also like to see a tenth point added to the plan in the way of a portable bank account to assist smaller banks.
“What stops smaller banks from putting [out] a really good package at the moment is they know how hard it is for small businesses to change from one bank to another,” Strong says.
“If all of sudden they know they can put together a package that is attractive, and will make people move, they can go and sell it in the knowledge that people can [change banks] very quickly.”
“The other overlooked group of people is the independent brokers. They are classic small business people – they’re innovative, they’ve got a lot of energy, they know what the market wants and they can recognise niche markets.”
“So again, because all of a sudden people can change banks, [independent brokers] will be able to put together really interesting products.”
However, Strong says he’s unsure whether the proposed policies would impact on bank behaviour because “the banks have been a law unto themselves no matter what we’ve done and will continue to be so.”