ISA calls for banking competition review

Australia’s highly concentrated banking system is “choking competition” and needs to be opened up to superannuation-holding rivals, according to Industry Super Australia (ISA).  

In a submission to the Financial Systems Inquiry, ISA said the removal of regulatory barriers to competition might be necessary to unravel the high concentration, which it said was costing businesses, consumers and the Government.  

“Public policy options should be focused on increasing competition in banking,” ISA said.  

“In particular, because superannuation can provide a competitor to the banks in terms of funding businesses and perhaps certain household liabilities, public policy should ensure banks cannot translate market power in banking into the super sector, choking competition in the business funding market.” 

ISA called for the removal of any government subsidies to the big four banks, which it estimated were anywhere between $1.3 billion to $3.1 billion. 

“The removal of the implicit subsidy is likely to lead to an increase in competition in the banking services sector leading to lower overall banking costs, in terms of both deposits and loans.” 

It said the “too big to fail” mentality associated with big banks could be responsible for the high concentration, but was to the detriment of smaller players.  

It said efforts to remove barriers to banking competition should become a top government priority.