Competitive and Sustainable Banking System Report

Broad reforms to build on the strength of our financial system

Stream One: Empower consumers to get a better deal

• Ban exit fees for new home loans – tough new laws to further strengthen existing mortgage exit fee reforms by banning exit fees outright on new home loans from 1 July 2011.
• Boost consumer flexibility to transfer deposits and mortgages – appoint former Reserve Bank of Australia (RBA) Governor Bernie Fraser to conduct a comprehensive feasibility study into technological options, the potential timeline and processes for implementing full account number portability.
  • Further enhance the capacity of Australian home borrowers to move their mortgages by accelerating the Treasury’s development of potential frameworks to transfer Lenders Mortgage Insurance and introduce a central registry for mortgages.
• Introduce mandatory key facts sheet for new home loan customers – mandate that lenders provide potential borrowers with a simple one-page ‘key facts sheet’ showing how much they will pay every month and over the life of their loan, and where they can shop around so they can compare lenders side by side.
• Empower ACCC to investigate and prosecute anti-competitive price signalling – new laws to prevent banks from engaging in anti‑competitive price signalling that is designed to keep interest rates higher than they would otherwise be.
• Fast-tracking legislation to get a better deal for Australians with credit cards – build on new national responsible lending reforms by cracking down on unfair treatment of credit card holders.
• Launch Bank on a Better Deal — community awareness and education campaign – national campaign to build understanding about the savings borrowers can make by walking down the road to get a better deal.
• Establish taskforce with Reserve Bank to monitor and enhance ATM competition reforms – Treasury to establish a taskforce with the RBA to take further action if required to enhance current reforms to boost competition and transparency on ATM fees.

Stream Two: Support smaller lenders to compete with the big banks

• Build a new pillar in the banking system by supporting the mutual sector – the Australian Prudential Regulation Authority (APRA) will quickly approve over 20 mutuals to use the term ‘bank’ if they apply, and review guidelines which currently prevent other mutuals from applying.
  • Put mutuals and smaller banks at the centre of the Bank on a Better Deal campaign, including introducing a new official ‘Government Protected Deposits’ symbol, and continue helping mutuals to develop a structure to raise aggregated funding.
• Confirm Financial Claims Scheme as a permanent feature of our financial system – to ensure continued depositor certainty and secure this critical source of funding for smaller lenders to help them make cheaper loans.
• Introduce a third tranche of support for the RMBS market – invest a further $4 billion in high-quality, AAA‑rated RMBS to continue supporting this vital funding market which our smaller lenders rely on heavily to put competitive pressure on the big banks, to build on the existing $16 billion investment.
• Accelerate development of bullet RMBS market for smaller lenders – accelerate design of most appropriate structure for smaller lender issuance of bullet RMBS, to strengthen and diversify their funding, as an alternative to traditional RMBS.

Stream Three: Secure the long-term safety and sustainability of our financial system

• Allow Australian banks, credit unions and building societies to issue covered bonds – diversify and strengthen funding for our financial system to secure its safety and sustainability in the decades to come, and harness our national superannuation savings to domestically fund more productive investment in our economy.
• Develop a deep and liquid corporate bond market – launch trading of Commonwealth Government Securities on a securities exchange, with Treasury to also finalise reforms to further reduce red tape associated with issuing corporate bonds to retail investors, to reduce our reliance on offshore wholesale funding by engaging our national savings.