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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

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
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
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


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