Jim Chalmers announces banking reform to boost transparency for customers

Banks will be forced to tell customers when they change the interest rates they pay on accounts and when cheaper deals are available under a major shake-up of the industry’s rules.

Banks will be forced to tell customers when they change the interest rates they pay on accounts and when cheaper deals are available under a major shake-up of the industry’s rules.

Under the changes — to be announced by Treasurer Jim Chalmers today (Saturday) — product comparison websites will also be forced to disclose their financial relationships with the providers whose products they spruik.

And, to make it easier for people to move their home loans without a mortgage broker, banks will be made to give their customers direct and easy access to the forms they need to exit home loans.

Mr Chalmers said the federal government wanted consumers to be able to access more choice, and better deals and services.

“We want to make it a little bit easier for Australians to get the best deal they can for their mortgages and savings accounts,” he said. “These changes will help people get a better deal from the banks.”

Treasurer Jim Chalmers wants to improve customers’ relationships with their bank. Picture: Martin Ollman

Alongside the changes, the Treasurer has also ordered a review into how to make life easier for small and medium-sized banks, who provide vital competition for the big four.

Among other things, this review will consider the recommendation in March from a House of Representatives Committee, that the government investigate allowing banks to raise money for home lending by issuing government-backed bonds.

Mr Chalmers will also task the Treasury with investigating ways to encourage people to switch to cheaper home loans and retail banking products when they are available.

The changes — designed to improve people’s experiences with banks — have been made in response to the ACCC’s 2023 inquiry into retail deposit products and its 2020 inquiry into home loan pricing, to which the Morrison government never responded.

The changes to disclosure rules around interest on transaction and savings, and improvements in the information banks must provide, will be implemented immediately.

This is also the case with the decision to force financial product comparison websites to show clearly how they rank products and their relationships with product providers, as well as the forcing banks to give customers easy access to the forms to exit a mortgage.

A review of smaller banks will also focus on how they can continue to compete with Australia’s big four: Commonwealth, Westpac, NAB and ANZ. Picture: NCA Newswire

The move to compel banks to notify customers about the availability of cheaper products – including bonus interest rate offers and when introductory lower interest rate periods end – will take longer, as the government says it will work with the banks on industry standards to apply across the whole sector.

The review into the problems facing small and medium-sized banks will be led by the Council of Financial Regulators (CFR) in consultation with the ACCC.

“The review will focus on the role that small and medium-sized banks play in providing competition in the sector, and the regulatory and market trends affecting them,” Mr Chalmers said.

“It will propose ways to improve regulation and ensure that oversight of these banks appropriately balances competition, innovation and stability.”

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