Australia’s biggest banks will be forced to regularly open their books for the competition regulator to reveal how they set their mortgage interest rates against the Reserve Bank cash rate.
The Australian Competition and Consumer Commission was granted new information-gathering powers in last week’s budget in a bid to make the banking sector more competitive.
It has been given annual funding of between $3m and $3.5m to set up a banking taskforce, with a dozen dedicated staff, and the capacity to hire extra consultants when necessary.
Rod Sims, the ACCC chairman, has said he will use the taskforce to compel the big five banks – Commonwealth, Westpac, ANZ, NAB, and Macquarie – to share confidential information with the regulator, which he will then publish regularly.
He said his information gathering power would help him determine how competitive the sector was.
“I’ll be going into this with an open mind, and I’ll have a much better view once we’re well into it,” he told Guardian Australia.
“But I think it’s fair to say, looking from the outside, it’s not a very strongly competitive market.
“If you look at the last 15 years their profits have gone up as a share of gross domestic product, their market shares have gone up, and you don’t get a sense of strong differentiation in the market between the various players.”
Relations between the Turnbull government and the big five banks deteriorated further on Wednesday over the government’s decision to force the bank executives to sign confidentiality agreements before they could view draft legislation.
The Australian Banking Association chief, Anna Bligh, said the move prevented senior staff from sharing the bill with their boards, shareholders, customers or the media and effectively made it illegal to be tested in the public sphere.
But the government is showing no signs of backing down on the levy, which has popular support across the electorate.
The treasurer, Scott Morrison, says the ACCC taskforce will hopefully provide complete transparency about what is going on inside the banks, making it harder for the banks to pass on the government’s $6.2bn banking levy to customers.
Sims says he suspects the banks will change their behaviour when they realise their rationale for setting mortgage interest rates will face greater scrutiny.
“We’re going to have access to information that you rarely have,” he said.
“We’ll be able to understand on what basis they’re making decisions. They will know we’ll have access to their documents, and we’ll be publicly reporting on what we find.
“It could well affect their behaviour, knowing that we’ll see everything.”
Sims said his broad information-gathering powers could stretch beyond the major banks, extending to “tier two” banks and brokers in the mortgage market.
“Eventually we could look at a range of things, but for this first year, if we judge that the broker market needed to be looked at we could do that,” he said.
“We haven’t formed that view yet. We’re just really focused on getting information from the five banks.”
Sims said the ACCC had already written to the chief executives of the banks informing them of the changes.
“We’re pulling together a team, we’ve got some people in place already, so we’re really under way.”
On Wednesday, the shadow treasurer, Chris Bowen, described the government’s decision to impose a bank levy on Australia’s big banks without imposing it on major foreign banks as “reverse protectionism” .
