COBA warns against ‘anti-competitive’ tax

The Customer Owned Banking Association is calling on the Abbott Government to stay the course on the Financial System Inquiry (FSI) to stop anti-competitive behaviours creeping into the banking system.

COBA CEO Mark Degotardi says that we are seeing an apparent willingness to reject the FSI’s recommendation against a deposit levy and suggestions that implementation of the capital recommendations will be delayed.

“This is extremely disappointing. The suggestion that a deposit levy may be needed because of delays in strengthening capital settings flies in the face of recommendations 1 and 2 of the FSI,” he said.

“These recommendations on bank capital are the top priority recommendations of the FSI and the Government should be sending a clear message to APRA to get on with implementing them.”

Degotardi says the high concentration of Australia’s banking system creates risks to both stability and competition, and an “anti-competitive” tax like the deposit levy will only make things worse.

“The perverse effect of a deposit levy is that it potentially makes the systemic risks posed by Australia’s highly concentrated banking system even worse.

“This is because a deposit levy is bad news for competition in banking as it hits the major banks’ smaller competitors much harder than it hits the major banks.

“The deposit levy is a mosquito bite for these systemically important banks but it is a python squeeze for the smaller players in the banking market.

“The deposit levy is not only a new tax, it is an anti-competitive new tax.”