Is there a banking sector oligopoly in Australia that is on the brink?
Recently, the Australian Government determined that the banking sector is highly concentrated with major banks having significant pricing power and capability to benefit shareholders at the expense of their customers. The House of Representatives Economics Committee’s ‘Review of the Four Major Banks’, commissioned by the government last year, concluded that Australia’s banking sector is an oligopoly and this can be detrimental to all Australians and the economy as it increases systemic risk. Australia’s five largest banks are highly profitable with earning more than $30 billion a year after tax and benefit from a regulatory system that has helped to entrench their dominant position in the market. Keeping a few related aspects in mind, the Government had recently announced for a six basis-point levy on the deposits of the country’s biggest banks in its annual budget that will bring A$6.2 billion over next four years and provide a more level playing field for smaller, regional banks and non-bank competitors. With the implementation of the new levy, Australia’s largest banks – Commonwealth Bank of Australia, Westpac Banking Corp, Australia and New Zealand Banking Group, National Australia Bank and Macquarie Group, will pay the charge on their liabilities including corporate bonds, commercial paper, certificate of deposits and tier-2 capital instruments. However, ordinary bank deposits, mortgages and other deposits protected by the financial claims scheme will be excluded from the levy base.
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