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Criticism of the Federal Government’s proposed banking reforms continues to flow in from all angles.
Yesterday both Aussie Home Loans and Moody’s Investors Service slammed the reforms that are designed to bring much needed competition to the mortgage lending space in Australia.
Aussie Home Loans executive chairman John Symond rebuked the government for failing to consult the sector that brought competition to the Australian mortgage market and criticised the sudden withdrawal of funds that could force the non-bank lender to lift its rates.
In his speech to the Senate Inquiry on Banking Competition, Mr Symond labelled the government’s suggestion that Australia’s credit unions and mutuals could become the fifth pillar a “joke”.
He said the biggest barrier to competition was a lack of wholesale funding costs for non-banks.
However, last week, the government told the AOFM to cut off funding assistance to lenders partly or wholly owned by a major bank.
Mr Symond’s criticism of the reforms were echoed by other industry pundits including Moody’s Investors Service, who labelled the competition plan “ineffective”.
Patrick Winsbury, a senior vice president at Moody's Sydney office, said the various initiatives to increase competition are likely to have an impact only over an extended period -- if at all -- and therefore create limited near-term pressure on the credit profiles of Australia's major banks, which are the principal targets of the government's proposals.
"In fact, the major banks stand to benefit from the ability to issue covered bonds. But the proposals provide only a foundation upon which to tackle the structural dependence of the major banks on offshore wholesale funding, which is the most significant negative credit issue that the Australian financial system faces,” Mr Winsbury said