Removal of four pillar policy needed
The four pillar policy needs to be removed to help retail banking competition, the Centre for International Finance and Regulation (CIFR) believes.
CIFR's "Competition in Financial Services" report, released today, found policy to date prioritises stability to the detriment of effective competition.
Head of the research team, Rob Nicholls, said although the recommendation to remove the four pillar policy opposed the Financial System Inquiry's view to prevent mergers, current competition law alone would achieve this objective.
"The four major banks are protected by this policy which offers little observable benefit to consumers, and may in fact be a source of consumer disutility," Nicholls said.
"Competition and contestability arise when there are reasonably low barriers to entry and exit. Our research points to this policy as a deterrent for those seeking to enter the retail banking sector in Australia."
The report's other main recommendation was for bank account number portability to make it easier for consumers to compare offerings and switch banks.
"This would use ‘know your customer' and central database systems in a similar form to those that have been used for mobile number portability," the report said.
"[And] introduce customer access to data held by banks to allow third parties to compare bank offerings across all banks."
Nicholls noted the measures would not be expensive and would lead to better consumer outcomes and ultimately more loyal consumers.
"Research also points to the fact that if consumers are able to compare options and see the advantages of their current offering or that the alternatives are not much different, they will stay with what they know," he said.
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