Aussie banks may exit wealth management voluntarily

WELLINGTON: Australian banks are likely to get out of their wealth-management businesses without the need for government to force divestment, according to the head of a parliamentary banking inquiry.

“You will see over time banks will get out of their wealth management businesses because it is an area that has caused them problems and it’s a relatively small proportion of their business,” ruling Liberal Party lawmaker David Coleman told Sky News Australia. “I’m not sure I would support forced divestment.”

The opposition Labour Party wants a so-called royal commission into the banking industry, with some of its parliamentarians urging a break-up of the nation’s biggest lenders amid claims a lack of competition allows borrowing costs to be kept too high. The government’s response, based on its 2016 inquiry, is closer scrutiny on how retail interest rates are being set, Coleman said.

The inquiry found that of the 20 times bank lending rates moved out of step with the Reserve Bank’s benchmark rate since 2000, it was bad for borrowers on 19 occasions, Coleman said.

Now regulators are able to go into banks, get documents and would identify whether an institution was justified in raising interest rates, he said. Banks and their executives could face action in terms of misleading or deceptive conduct.

“We need to ensure every bank executive knows that the representations they are making publicly about interest rates are now subject to deep internal scrutiny,” Coleman said.