The Treasurer has announced 3 areas of banking system reform designed to firstly assist consumers, secondly assist smaller lenders and thirdly to secure the financial system.

The reforms are set out in the Competitive and Sustainable Banking System Reform Package.

Consumer-focussed reforms
The Government will:

• ban exit fees on new (not existing) home loans from 1 July 2011 (it’s not clear if the ban is only on early termination fees or includes deferred administration fees)
• introduce (if possible) full account number portability to assist transfer deposits and mortgages
• Introduce a mandatory key fact sheet to be given to new home loan customers Treasury will consult with consumer groups and the industry to settle the form, before releasing exposure draft legislation during the first sittings of Parliament in 2011.
• Empower the ACCC to prosecute anti-competitive price signalling (contained in the Exposure Draft – Competition and Consumer Amendment Bill (No.1) 2011)
• The Government will amend the National Credit Code provisions relating to credit cards including forcing credit card lenders to allocate repayments to higher interest debts first. Treasury will accelerate its industry and consumer consultations to allow the relevant legislative amendments to be introduced in the first sitting of Parliament in 2011.
• Launch a national community awareness and financial literacy campaign (Bank on a Better Deal)
• Set up a taskforce with the Treasury and Reserve Bank of Australia to enhance ATM competition reforms

Smaller lender reforms:
The Government will:

• Support mutual credit unions and building societies including APRA’s review of the current guidelines for approval to use the term ‘bank’ for the Government to review in March 2011.
• Confirm the Financial Claims Scheme as a permanent feature of the financial system (but the current $1 million cap is still being reviewed)
• Introduce a further $4 billion investment to support the Residential Mortgage Backed Securities market
• Accelerate the development of a ‘bullet bond’ structure for RMBS issuance to strengthen and diversify RMBS funding for smaller lenders

Financial system safety:
The Government will:

• Allow all banks, credit unions and building societies to issue covered bonds
• Develop a corporate bond market by launching the trading of Commonwealth Government Securities on a securities exchange

Timetable
December 2010:
consultation on exposure draft price signalling legislation, mortgage key facts sheet and Government Protected Deposits symbol

January 2011

• account number portability review
• exposure draft credit card reform legislation
• draft exit fees legislation
• Treasury report on trading in commonwealth government securities
• Treasury report on corporate bond regulation reforms

February 2011

• ATM taskforce
• report on issues affecting Australian indigenous and other remote communities

March 2011

• Exposure draft mortgage facts sheet legislation
• Exposure draft covered bonds legislation