(Repeat story published on Friday)
By Byron Kaye and Tom Westbrook
SYDNEY, Oct 14 (Reuters) - Australia’s major banks are an “oligopoly” and must undertake reform to boost confidence in the financial system following a series of scandals that have fuelled calls for a sweeping judicial inquiry, the corporate regulator said on Friday.
“We’re in a market that is frankly an oligopoly,” Australian Securities and Investments Commission (ASIC) Chairman Greg Medcraft told a parliamentary hearing dominated by questions about how to improve policing of the finance sector.
“Work is needed to restore trust and confidence,” he said, while conceding that the banks had taken “important steps in the right direction”.
The firm language will be read as a warning to the “Big Four” banks - Commonwealth Bank of Australia, Australia and New Zealand Banking Group, Westpac Banking Corp and National Australia Bank - that regulators are watching how they respond to public anger over the perception that they abuse their market power.
The four lenders together control four-fifths of the industry in Australia and have enjoyed years of record profits thanks largely to their dominance of the mortgage market.
But a string of scandals including alleged interest-rate rigging, poor financial advice and insurance scams has exposed them to allegations that their power has fostered a culture of exploitation and unaccountability.
In appearances before another parliamentary committee last week, bank chiefs expressed regret over any wrongdoing but characterised the problems as aberrations.
They have rejected calls from whistleblowers and the opposition Labor Party for a powerful Royal Commission inquiry, and have the backing of the ruling Liberal Party.
Medcraft and Australian Prudential Regulatory Authority Chairman Wayne Byres, who also testified on Friday, said forcing banks to increase transparency in relation to advertising mortgage products would improve competition, as would cutting penalties for borrowers who changed lender.
Byres offered a brighter assessment of the sector, however, suggesting it was generally more compliant with regulations since the global financial crisis and more proactive in weeding out poor practices.
“Having got the message they need to do better, they are looking harder for instances of where things have gone wrong and where people have been mistreated,” he said.
Australian Competition and Consumer Commission Chairman Rod Sims said that while the banking industry was “highly concentrated” and “a concern”, other sectors of the economy, like energy, were even less competitive.
Australian Bankers’ Association Chief Executive Steven Münchenberg said in a statement before Medcraft spoke that the industry was implementing “extensive reforms”. (Reporting by Byron Kaye and Tom Westbrook; Editing by Stephen Coates)