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Wayne Swan Unveils Banking Reforms

Wayne Swan Unveils Banking Reforms - In the first hearing of a Senate inquiry into banking competition, Reserve governor Glenn Stevens maintained that competition was fiercer now than it was 15 years ago. He said consumers had greater choice and banks were under greater competitive pressure, but higher funding costs posed difficulties for small lenders.

As the government strived to support a ''fifth pillar'' to compete against the big banks, Mr Stevens said it must be wary of any unintended consequences of helping smaller lenders, citing examples from the US subprime crisis.

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Some moves - including providing a government guarantee to mortgage bonds - needed to be treated with great care, Mr Stevens said.

Wayne Swan Unveils Banking Reforms

''When you think about extensive public intervention in housing markets, we don't need to look any further than the United States of America to see that that can go wrong if we're not very careful with the way incentives are designed,'' he said.

His warning did not apply to the government's plan to spend an extra $4 billion on mortgage-backed securities. He was reluctant to comment on other aspects of its banking reforms.

National Australia Bank chief executive Cameron Clyne signalled that borrowers could still face more out-of-cycle interest rate rises because other funding costs were the main influence on mortgage rates.

Wayne Swan Unveils Banking Reforms
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