Big banks under siege

CREDIT unions and building societies will be allowed to call themselves banks under reforms that Treasurer Scott Morrison says will deliver better home loan deals.

Aiming to cut the big four banks’ power, the government will remove restrictions on which lenders can call themselves banks, arguing it will give borrowers more options, and increase competition.

Similar reforms in the United Kingdom encouraged a flood of new lenders to enter the market, prompting the big banks to match their offerings with cheaper mortgages.

The changes could encourage innovative online-only banks to set up shop, providing banking and lending services digitally for customers who do not use bricks-and-mortar branches and ATMs.