Bank of Queensland Ltd (BoQ) chief executive David Liddy has seized upon Westpac Banking Corporation's variable mortgage interest rate hike to call for government intervention to safeguard competition in the banking sector.
Liddy, who is also the Australian Bankers' Association deputy chairman, pointed to Westpac's bigger than expected 45 basis point rate rise to highlight the "severe disadvantage" the pricing differential of the government's "anti-competitive" wholesale funding guarantee imposes on regional banks.
The current pricing structure demands BoQ and Bendigo and Adelaide Bank Ltd pay 150 basis points to access the guarantee because of their relatively low triple-B-plus long-term credit ratings.
By contrast, the double-A rated big four banks are charged 70 basis points, giving them lower borrowing costs relative to the regionals and affording them greater pricing power in the retail loan market.
Liddy's comments came on Wednesday as BoQ raised $AU1.1 billion of four-year floating rate government guaranteed notes maturing on October 25, 2013. The bank had planned to sell at least $AU500 million worth.
Liddy has campaigned all year for a flat fee to be charged across all banks accessing the guarantee to help regional banks compete in the retail home loan market, and on Wednesday called for Federal Treasurer Wayne Swan to intervene.
"In a marketplace in which super-banks like Westpac are increasing their rates above (the) RBA (Reserve Bank of Australia) to counteract the increased funding costs, the pressure being placed on regional banks is significant," Liddy said in a statement.
"We have already lost a couple of regional banks in the Australian banking sector over the past 18 months - surely the Australian government wants to ensure the remaining alternatives to the big four are able to remain competitive?
"I would urge the Treasurer to act now in levelling the playing field on pricing of the guarantee so we can ensure a competitive banking environment.
Westpac on Tuesday announced it would raise its standard variable home loan rate by 45 basis points to 6.76%, outstripping a 25 basis point hike in the RBA's cash rate to 3.75%.
Westpac said the move was driven by continuing cost pressures in wholesale funding markets.
BoQ, together with Westpac's major rivals, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ) said on Wednesday their standard rates were still under review.
Liddy's plea to the Treasurer comes after he has repeatedly warned a banking oligopoly would develop if competition was stymied further.
"If we're not worried about a retail style oligopoly in banking in Australia we should be because we've got four majors that are now underwriting 90 to 95% of all (new) mortgages in Australia," he said last Friday.
"We've got four major banks that are repricing all their commercial and small business customers margins upwards.
"As a result of that you've got cross subsidisation in the deposit market where the majors are paying 5.5% on retail deposits when the cash rate is 3.5 (percent)."
"So from a regional bank's point of view, and I'm not crying poor here, we've got a real serious competition problem in Australia in terms of banking."
Separately, Bendigo and Adelaide Bank said it had increased the size of its Torrens 2009-3 residential mortgage backed security (RMBS) securitisation issue from $AU500 million to $AU1 billion.
Managing director Mike Hirst said the stronger investor demand reflected increasing confidence in the securitisation market where sustainable pricing levels can now be achieved.
