Monday, December 06, 2010

Swan's plan: Counterbalancing banks

. Crackdown on price signalling

. ACCC to monitor fees

. Consultation on bank-switching

. Banks to provide more information

. Government guarantees for mutuals

Australia's big four banks will face government-backed competition and much greater scrutiny as part of a package of measures aimed at weakening their market position due to be unveilled Wednesday.

To be presented to Cabinet today the Treasurer's five-point plan is short on detail in a number of areas, proposing further consultations with banks and consumer groups to draw up measures that will work.

Mr Swan is keen to avoid a repeat of the dashed expectations that followed his 2008 bank-switching package in which the reality of a non-existent hotline and badly-maintained website failed to live up the promises.

On bank-switching the Treasurer will announce broad goals including that bank switching should be a matter of filling in just one form and ask the banks and consumer organisations to refine the details. He will mention but not endorse the idea of portable bank account numbers as one way of achieving the goal...

The final shape of the measures will be announced in the first half of next year.

Mr Swan said yesterday he had been working closely with the consumer group Choice and would "keep working hard to empower consumers so they can always walk up the street and get the most competitive deal on offer".

Choice staff will today hand out chocolate money in Martin Place to launch a web-based service called "Compare, Ditch and Switch" which will allow borrowers to see a glance how much they could save by switching.

"You don't have to wait for banking reform. People who can spare a few minutes might be surprised at how much they can save," said campaign director Richard Lloyd.

Choice says mortgage holders with the big four banks can save up to $2500 a year, credit card holders up to $440 and depositors up to $330.

Mr Swan's package will give a leg-up to the smaller banks and building societies and credit unions most likely by extending a government guarantee to their borrowings and also by guaranteeing their deposits even after the government guarantee on all deposits expires late next year.

The Competition and Consumer Commission will be given a greater watching brief over banks, tasked with ensuring their fees are justified by their costs. It will also be given power to to regulate "price signalling" by banks, constraining what they are able to say to shareholders, the media or to other banks ahead of rate moves.

While stopping short of specifically regulating automatic teller machine fees in the way proposed by The Greens, the measure will empower the ACCC to investigate all fees and publicise its findings.

Greens MP Adam Bandt said he welcomed the "indication government is willing to take up our ideas," but wanted to see details.

"It should not be tempted to squib. The public wants something substantial and will not be happy with anything less."

The Treasurer's package will also ensure consumers get better information the point of sale with mortgage and credit card providers required to present them with accurate information as to the likely costs.

The package comes as the Senate prepares to grill Australian banks over their practices with Westpac chief Gail Kelly due to appear before the inquiry next week.

Published in today's SMH and Age

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