The Australian Bankers' Association has hit back at claims that banks are making record profits due to reduced competition, as the Senate announces an inquiry into the sector.
The Australian Bankers' Association has hit back at claims that banks are making record profits due to reduced competition, as the Senate announces an inquiry into the sector.
"There is no evidence to support this claim," said chief executive of the ABA Steven Münchenberg.
The comments come as the nations banks begin their reporting season.
This week National Australia Bank has recorded a $4.22 billion profit and ANZ a $5.133 billion profit.
Westpac is expected to record a profit of about $6 billion and earlier in the year Commonwealth Bank recorded $5.66 billion profit.
Opposition Treasury spokesman Joe Hockey has attacked the banks.
According to Mr Hockey, St George was no longer independent, nor BankWest, Aussie, Wizard or RAMS.
"Australians are facing ... four major banks that are making bigger and bigger profits and are seeking the opportunity to gouge home borrowers, and I think we need to do something," Mr Hockey said.
He said the inquiry was a good first step, but the best outcome would be a comprehensive review.
But the comments have raised the ire of Mr Münchenberg.
"The facts show that the profits of the major banks are no larger today than they would have been, if there had been no global financial crisis," he said.
"Suggestions that major banks are making excessive profits due to a fall in competition are without foundation.
"There is clear evidence of competition in Australia's banking system.
"In the past two years, banks have slashed or removed altogether a range of unpopular fees, such as late payment and overdrawn account fees, as they fight for customers' business.
"Banks would not have cuts fees by $500 million if there was insufficient competition," he said.
Mr Münchenberg also denied claims that banks had been propped up during the GFC.
Independent senator Nick Xenophon was backed by the opposition in calling for the economics reference committee to examine competition within the industry.
Senator Xenophon believes consumers are being "ripped off" by exorbitant fees and charges and interest rate margins higher than anywhere else in the world.
The inquiry will examine the products banks offer, their fees and charges and the current level of competition between bank and non-bank providers.
It will also look at whether regulation restricts competition and "the likely drivers of future change and innovation in the sector".
Senator Xenophon says "most people feel enough is enough".
See statement from ABA below:
The Australian Bankers' Association (ABA) said the claim that banks are making record profits due to reduced competition is false.
The ABA was responding to statements by politicians and others who have made this claim as the reporting season gets underway for Australian banks.
Steven Münchenberg, Chief Executive of the ABA, said: "There is no evidence to support this claim. The facts show that the profits of the major banks are no larger today than they would have been, if there had been no global financial crisis (GFC)."
"If you look at the trend in the banks' profits before the GFC, it shows that banks'
profits today are in line with that trend." "Suggestions that major banks are making excessive profits due to a fall in competition are without foundation."
A solid, healthy and reliable banking system is critical for a stable Australian
growing economy.Mr Münchenberg said: "The 'headline' profit numbers of banks are always large, that's because they are very large Australian businesses. Four of our top five businesses are banks."
"There is clear evidence of competition in Australia's banking system. In the past two years, banks have slashed or removed altogether a range of unpopular fees, such as late payment and overdrawn account fees, as they fight for customers' business. Banks would not have cuts fees by $500 million if there was insufficient competition."
"The main reason banks have a greater market share at the moment is because Australia's healthy banks stepped in to fill the credit gap left when other smaller lenders, particularly non-bank lenders, were disadvantged by soaring funding costs during the GFC."
"Had banks not increased their share of lending to home buyers, businesses and others, Australia would have experienced the sort of credit rationing that has badly damaged the economies of some other countries."
Mr Münchenberg said he had heard politicians and commentators claim that banks had to be 'propped up' during the GFC.
It is important to note that, unlike overseas banks, no Australian bank has been bailed out by taxpayers. In fact, Australian banks and other lenders have already paid around $1.1 billion for the use of the Government's wholesale funding guarantee and will pay more than $5 billion over its full life.
Profits made by Australian banks are crucial to the returns of Australia's superannuation funds which assist Australians saving for retirement and provide income for retirees. Dividends are paid out of company profits to their shareholders which can be individuals and our superannuation funds.
"Banks do not keep all profits. Around three quarters of profits each year are paid back into the community. Over the last four years, dividend payouts to ordinary shareholders have totalled more than $55 billion," Mr Münchenberg concluded.
It's time for the big four banks to give something back to Australian taxpayers, shadow treasurer Joe Hockey says.
He wants a full scale inquiry into competition in financial services, he told the Seven Network on Tuesday.
St George was no longer independent, nor were BankWest, Aussie, Wizard or RAMS, he said.
"Australians are facing ... four major banks that are making bigger and bigger profits and are seeking the opportunity to gouge home borrowers, and I think we need to do something," Mr Hockey said.
"The treasurer's had 31 warnings, he's warned them 31 times, do not go further than the RBA (in increasing interest rates), and they just ignore him."
He said he agreed with bankers that Australia benefited from strong banks, and the Howard government had reduced the burden of regulation to ensure that was the case.
But the Australian banks were now in a privileged position, after taxpayers had supported them with funding guarantees.
"Now is the time for the banks to give something back," Mr Hockey said.
"We need a proper, full scale review of the financial system so that everyone can understand exactly where financial services is going to take us over the next few years."
