Big Four Gouging Grows

A lack of competition has also allowed Australia’s major banks to pocket almost four times the profit per customer than its rivals in the US and UK.

The Industry Super Australia submission to the Financial System Inquiry backs the call by regional banks for a fairer playing field.

Since the global financial crisis and the implementation of the bank guarantee, dominance by the “Big Four” of home lending has grown from 63% to 85 per cent of the $17 trillion mortgage market.

This gouging of home buyers has delivered bumper profit growth to the Big Four. Commonwealth bank, Westpac, National Australia Bank and ANZ.

In a submission to the Federal Government’s root-and-branch review of the financial system, the ISA said the majors pocketed between $12 billion and $37 billion from 2007-12.

The four most prominent mid-tier banks – Bendigo and Adelaide, Suncorp, Bank of Queensland and ME Bank – joined forces this week to call for an overhaul for the sector to boost competition and deliver lower charges to customers.

Big Four Banks have long rejected any plans for a levy on the “too big to fail” guarantee, claiming their dominance of the home lending market and lower funding costs are a result of  better risk management.

Strong balance sheets and well structured fund profiles are seen by the majors as the key reason they are able to borrow at cheaper rates on global markets than the smaller mid-tier-banks.

ISA chief executive David Whiteley said making sure the nation’s assets were utilised better would be key to lifting productivity and funding the next round of infrastructure development.

“The bank guarantee provided stability but it is time to look at more efficient capital formation,” he said.

“In terms of retail banking,  Australia’s Big Four banks also have higher profit per customers than the top banks in comparable countries.

“We need to make sure everything is put on the table for discussion.”