Banks go on the attack as Senate approves banking inquiry

Banking chief Mike Smith has slammed independent and Opposition senators who have succeeded in their bid to launch an inquiry into the banking sector, despite angry protests from the big four banks.

The inquiry, which will examine fees and charges in the sector, competition levels, the role of smaller lenders and barriers to entry, has largely been sparked by the actions of shadow treasurer Joe Hockey, who has called for the Government to examine the effectiveness of its guarantee for bank funding, interest rate setting and fees.

However, ANZ chief executive Mike Smith – who yesterday revealed that the bank’s cash profit had soared more than 50% to over $5.1 billion – has attacked Hockey, likening him to Venezuela’s socialist president Hugo Chavez.

“Peter Costello was a very good treasurer,” Smith told reporters. “People like Malcolm Turnbull understand this stuff and are very creditable.

“Joe Hockey should take some economics lessons from Peter Costello and Malcolm Turnbull rather than bloody Hugo Chavez.

“The economic impact on everyday Australia of what he is proposing is absolutely extraordinary.”

However, independent senator Nick Xenophon says the public wants to see “concrete reforms” in the sector.

“There’s nothing wrong with a bank making a healthy profit; the issue is if those profits are a result of an environment that is not as fully competitive as it should be,” he told Bloomberg.

Xenophon has also attacked ATM fees, which he describes as a “disgrace”. 

However, Australian Banking Association chief Steve Münchenberg says there have been six inquiries into the banking sector in the last two years and another one is unnecessary.

 He also says the strength of the banking sector was crucial in guiding Australian through the worst of 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.”

“But there are signs of life in the securitisation market and we have recently seen some non-bank lenders come back into the marketplace.”

The banking inquiry has also been supported by University of New South Wales competition expert Frank Zumbo, who argues the mergers of Westpac and St George Bank and Commonwealth Bank and Bank West – both of which were allowed to occur at the height of the GFC – have weakened competition in the sector to the detriment of consumers.

“With the majors recently announcing record profits and healthy net interest margins, it’s clear that borrowers are paying more in interest than they should be as a result of the overwhelming dominance of the four major banks,” he says.