Just months after the financial services royal commission reported, the Australian Competition and Consumer Commission is agitating for another review of the banking sector over competition concerns.

And it’s a move that bank behaviour has warranted, according to industry specialists.

There was so little competition among the big banks that this week’s mortgage rate drops on the heels of the Reserve Bank’s cash rate cuts could be seen as “synchronised swimming”, said Josh Mennen, lawyer with Maurice Blackburn.

Responding to media reports that it was pushing for a banking review, the ACCC said “We are currently discussing potential options for our next inquiry, including the various approaches we might take and which stakeholders we would seek to engage with”.

Treasurer will consider

Treasurer Josh Frydenberg said the ACCC’s push “will be given due consideration.” But he also said government is working through the recommendations from the banking royal commission, “which covered many issues with the major banks”.

While the royal commission made recommendations about banks, the competition issues the ACCC would examine “was not an area that Commissioner Kenneth Hayne had the purview or resources to go into”, said Mr Mennen.

Hayne half done

“I thought the Hayne Commission was only half completed. It completed its first mandate of uncovering misdeeds of the sector but not the second area of determining future directions,” said Patrick McConnell, a finance specialist from Macquarie University.

The commission investigations bore fruit on Friday when the Australian Securities and Investments Commission brought 87 criminal charges against CommInsure, the Commonwealth Bank’s insurance arm. The charges relate to alleged breaches of anti-hawking provisions through telephone sales of life insurance products. 

While the breaches have potential penalties of only $1.85 million, they are significant because they are the first criminal charges brought against the banks stemming from the commission.

“With criminal charges the onus of proof is higher than for civil action so it shows that ASIC is prepared to take on the banks despite that,” Mr Mennen said.

Since the royal commission told regulators to toughen up, ASIC has spectacularly and embarrassingly lost a case against Westpac over responsible lending. The Australian Prudential Regulation Authority also failed in a prosecution of IOOF over breaches uncovered by the commission so regulators need a victory to match their new tough talk.

“ASIC need to chalk up a win following the royal commission and this could be the action to achieve that,” Mr Mennem said.

CommInsure’s reputation has been badly damaged by refusals to pay out on policies of critically ill clients. Its actions were one of the factors leading to the calling of the Hayne royal commission.

CBA was so damaged by the resulting scandal they sold the insurer to AIA for $3.8 billion in a deal expected to be completed at year’s end.

Kevin Davis, finance professor at the University of Melbourne, said the ACCC could launch an inquiry on the heels of the royal commission and a review by the Productivity Commission last year because of its specific mandate. “It has set up a a financial services area and part of its remit is to report on regulation.”

Mr McConnell said the lack of competitiveness in the banking sector was stark. “The ACCC in a report last year slammed the ‘four pillars’ policy and I agree.”

“We have four big banks accounting for about 80 per cent of the banking system. They are totally protected from competition and we are not talking about fixing it,” Mr McConnell said.

“The Reserve Bank cut interest rates by 0.25 percent this week and the banks said ‘we don’t have to follow you’.”