Big four Aussie banks face shake-up

Australian Treasurer Joe Hockey says the report lays out a blueprint for the next decade.

Wide-ranging report recommends capital requirements be raised to make country’s lenders less likely to fail.

Australian banks should be forced to hold more capital to minimise their risk of failure and improve competition, the Financial System Inquiry has found.

The final report of David Murray's blueprint for the future of Australia's financial system says capital requirements should be raised to make Australian banks less likely to fail, but also to minimise the costs to the taxpayer if they do.

It would also level the playing field for smaller banks and lenders, reducing the perception that the Government would step in to rescue the big banks if they were in trouble.

The big banks have already complained that holding extra capital would be damaging, and ANZ says it will result in higher interest rates for customers.

The inquiry also recommends clamping down on borrowing by superannuation funds and the introduction of a competitive process to allocate new workforce entrants to MySuper products. Provisions that deny some workers the ability to choose their own super fund should also be removed.

The report also calls for a new committee to facilitate financial system innovation, because existing structures are failing to keep up with changes in technology.

The inquiry also recommends a clean-up of credit card surcharge rules, which would allow consumers using debit cards to avoid paying exorbitant surcharges when paying for airline tickets and other items.

Australian Treasurer Joe Hockey said the report laid out a blueprint for the next decade. "The financial system is vitally important to boosting productivity and growth in the Australian economy," Hockey said at the release of the report in Sydney.

"The recommendations of the inquiry seek to improve efficiency, resilience and fair treatment in the financial system, allowing it to achieve and support growth and a better standard of living for future and current generations," Hockey said yesterday.

Murray, a former Commonwealth Bank boss and Future Fund chairman, was last year charged with undertaking the biggest health check of Australia's financial system since the 1997 Wallis inquiry, which led to the establishment of the Australian Prudential Regulation Authority.

The inquiry received more than 6500 submissions since producing an interim report in July.

The Government says it will now consult stakeholders before it makes any decision on the recommendations, with a formal response to be released in mid-2015.

- AAP