No need for people's bank, say lenders
Sydney Morning Herald
Thursday July 9, 2009
SMALL and large lenders alike yesterday united to head off a call for the creation of a "people's bank" to take on the dominance of the Big Four institutions, which industry groups claimed would add very little to the competition that already existed.The sector of the industry that would be most threatened by such a move the building societies and credit unions responded by saying that the member-owned mutuals already filled the gap that a group of prominent economists claimed now existed.And the main banking lobby group argued that the creation of a Kiwibank-style operator the savings body set up by the New Zealand Government to counter the dominant market share held by the country's Australian-owned banks would only undermine the smaller institutions.Abacus, which represents the mutuals, said the economists would do better by supporting the cause of Australia's remaining 126 credit unions and building societies rather than pushing for a state-owned institution that would replicate the services they offered."Credit unions and mutual building societies exist for their members; being mutual organisations, their members own them," said Louise Petschler, Abacus's chief executive, in response to the economists' call published in yesterday's Herald."Instead of maximising external shareholder returns, credit unions and mutual building societies put their profits back into better rates, fairer fees, responsible lending and outstanding customer service."Instead of arguing for a 'people's bank', the economists should recognise the strong competitive alternative to the big four banks: credit unions and building societies," she said.Abacus said the loan and deposit rates offered to the 4.6 million people who use its members were consistently better than the banks', with discounts on mortgage interest rates as high as 0.5 per cent. The mutual sector claims 7 per cent of the new home loan market and 12 per cent of household deposits.The Australian Bankers Association, which represents the Big Four banks, the remaining regional lenders following the recent takeovers of St George and BankWest, and foreign institutions, said that a government-owned "Aussiebank" would threaten the future of the small banks.Such an institution would take business away from the likes of the Bank of Bendigo and Adelaide and the Bank of Queensland, which have been increasingly dependent on building their deposit bases to meet their lending needs as a result of the global financial crisis, the ABA said."We think it would erode competition rather than increase it," said David Bell, the ABA's chief executive. Using the examples of the publicly owned state-based banks that collapsed or were taken over in the 1980s and 1990s, he argued that "Aussiebank" would also soak up much-needed government capital.It would also risk having to be bailed out by taxpayers if it failed.
© 2009 Sydney Morning Herald
Share This