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Competition and Retail Banking

Office of Regulation Review submission

This submission was released in March 1995. The submission examines whether fees and charges are set in a competitive environment, looks at their incidence on different groups within society and assesses the case for government intervention.

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Contents

Preliminaries
Contents, Summary

1   Introduction

2   Structure of Australian Retail Banking
2.1   Market shares and access
2.2   Breadth of banking products
2.3   Types of bank fees and charges

3   Measuring the Performance of Banks
3.1   Net interest rate margin
      Net interest spread
      International comparisons
      Distributional issues
3.2   Other indicators of competitiveness
      Market share
      Profitability
      Cost efficiency
      Service quality and product range
3.3   Summing up

4   Is Competition Effective?
4.1   Single bank market power
4.2   Collusion
4.3   Oligopolistic pricing
4.4   Consumer inertia and ‘lock-in’

5   User Pays
5.1   Impact of deregulation
5.2   One step at a time
5.3   Charges can be further refined

6   Financial Institutions and Community Service Obligations
6.1   Who are the disadvantaged groups?
      Exemptions from paying fees
      Avoidance of fees
      Conclusion
6.2   Options for government
      6.2.1   Social security payments by cheque
      6.2.2   Further options
            Compensation via social security payments
            In-kind vouchers
            General subsidies to all bank consumers
      6.2.3   A “community service obligation” on banks?
6.3   Summing up

References

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