The Organisation for Economic Co-operation and Development (OECD) has echoed the calls of David Murray for changes in the country’s financial system, noting that need to curb the big four’s competitive advantages, according to The Australian.
OECD, the world’s top public policy think tank, also highlighted the risks of “speculative activity in the housing sector”.
The think tank’s biannual review of Australia said it welcomed the Financial System Inquiry led by Murray as a way of mitigating the banks’ implicit government guarantee, arising from the perception they are too big to fail, and offered support to APRA to limit investor lending.
“The global financial crisis strengthened the already dominant position of the four main banks, as two of them took over small banks over this period,” the OECD said, referring to the purchase of St George and Bankwest by Westpac and Commonwealth Bank in 2008, respectively.
It also acknowledged the net interest margins of the country’s major banks have dipped to 30-year lows, just above 2%. OECD said the government should “maintain deep microprudential oversight and consider using macroprudential tools to bolster credit safeguards and signal concern”.
Regional banks have also backed Murray’s proposals for the financial system, while some of the big banks have remained mum on the issue.