A new report into the banking and finance sector has found more competition is needed in order to keep the big banks honest.
The report, conducted by ratings agency Moody’s, found while Australia’s mutuals possess strong balance sheets, competition is constrained and the major banks are benefiting from increasing market power.
The report attributed a lot of the problems to cheaper funding for major banks and ongoing regulatory burden on some of the smaller players.
Abacus chief executive officer Louise Petschler said the mutual banking sector welcomed the results and, as such, are now pushing for a thorough review of Australia’s financial system.
“Moody’s report shows that mutuals are a strong, stable and significant part of the banking system,” Ms Petschler said.
"Their analysis supports our argument that a thorough review of Australia’s financial system is needed to increase competition and choice for consumers.”
According to Ms Petschler, the report, "Australia's Mutual Financial Institutions: Balance Sheets Strong But Challenges Apparent", found the industry faces “structural constraints” including access to funding that will affect growth, despite noting government efforts to improve competition.
“The report shows customer-owned banking institutions are strong and lead the market in terms of responsible lending,” Ms Petschler said.
“It also notes constraints and growth challenges for those who want to take on the Big 4, and those issues require careful review and new ideas in response.”
“Since Abacus issued its call two weeks ago, major banks, consumer and business groups have all agreed the time is right to review our financial system.”
“A financial system inquiry, with small and big players at the table, makes perfect sense to us for a better banking deal for Australians.”