‘Competitive pressure’ on Australia’s Big Four banks ensured

Australian government set measures to intensify competition among its biggest banks to cut banking charges.

Australian Prime Minister Kevin Rudd will ensure “competitive pressure” is placed on the nation’s so-called Big Four lenders after three of them raised interest rates more than the central bank, Treasurer Wayne Swan said in a report in Bloomberg.

“The Rudd government understands the need to keep competitive pressure on the big banks,” Swan said in a weekly economic note released in Canberra. Commonwealth Bank of Australia, Australia & New Zealand Banking Group and Westpac Banking Corp. all increased their home-loan mortgage rates by more than the official cash-rate increase on 1 December 2009.

Australia’s credit unions, building societies, home-loan originators and other smaller lenders have battled for market share and funding after the U.S. subprime collapse shuttered global securitisation markets. The strength of the Big Four is eroding competition and means any expansion plans they have through merging with smaller rivals are unlikely to be approved, the chief competition regulator said today.

“There’s less competition” in Australia’s banking industry, Competition and Consumer Commission Chairman Graeme Samuel said. “When you’ve got less competition, you’ll have higher prices being charged.” Any proposed mergers would be examined critically, based on existing and likely future competition, he said.