It's banks versus credit unions now

Source: The Australian

Australia's four big banks have a lion's share of the market since late 2008, with the merger of Westpac and St George Bank.

With reforms poised to be announced soon, the lobby group representing 120 credit unions and building societies has called on the government to provide a wholesale funding guarantee for smaller lenders, as it did for the banks during the global financial meltdown.

Abacus chief executive Louise Petchler argues this would help her sector compete by reducing their funding costs.

"We don't see these as expensive measures for the government at all," she told ABC Radio today.

"One of the problems we had with the wholesale funding guarantee that existed previously was the big banks were charged 70 basis points and we were charged 150 basis points."

Ms Petchler said a new wholesale funding guarantee scheme should be set up on a flat-fee basis, targeted at regional banks, credit unions and building societies.

That would accelerate growth and "hopefully" increase pressure on big banks.

But Australian Bankers' Association chief executive Steven Munchenberg has vowed to oppose measures which would help credit unions at the expense of the smaller banks.

"Any suggestion that the government is going to back the credit unions and the building societies alone will get a very strong negative reaction from us," he told Sky News on Thursday.

Doing so would further undermine the smaller banks in Australia who already were finding it hard to compete.

"We think that would be a very poor outcome if the government were to back credit unions and building societies against our smaller banks such as Bendigo and Bank of Queensland and Suncorp and others," Mr Munchenberg said.

A separate Senate inquiry into banking competition has received 54 submissions.

The Australian Chamber of Commerce and Industry, the nation's biggest employer group, in its submission called for measures to set up a fifth banking pillar.