Big Four Banks Have Unfair Advantage Says Inquiry Head

Post by Sharat on May 14, 2014 · Under News · 1 Comment 

The person leading an inquiry into the Australian financial system has said that government underwriting of the big four Australian banks during the global financial crisis gave them an unfair advantage over smaller competitors.

The Department of Treasury and smaller banks have long argued that the government wholesale debt guarantee created an unfair playing field by enabling the big four lenders to access more funds cheaply.

David Murray who heads up the government’s financial system inquiry says the perception is that the big four lenders are too big to fail.

“The perception of the government as a backstop may provide competitive advantages for some and can distort prices at the same time. The GFC shifted public expectations of when and where governments will intervene; the question for us now is whether we are content to accept that shift.” He said during a luncheon in Sydney.

Commonwealth bank has responded by arguing the major banks were not given any special treatment and instead there is general support by the government for the whole banking system.

According the Mr. Murray the inquiry will issue its report in July and it will focus on three main issues. The government intervention into the industry, potential consequences of the present financial system and what the drivers for potential change in the economy could be.

Mr. Murray added he would like to see less regulation of the financial syste,

“From here it would be a fantastic outcome if the regulation of our system was kept at its necessary minimum while the supervision of the system was kept at world’s best practice,” he said.

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