Australia’s big four banks may not be as comfortable with a proposed ban on mortgage exit fees as they are letting on, a Treasury official says.
Under the federal government’s proposed reforms to improve banking competition, exit fees on new standard variable home loans would be banned from July 1 this year.
Many small players in the banking sector have expressed concern about the financial impacts of the proposed ban.
ANZ and National Australia Bank have already scrapped mortgage exit fees, while Westpac Banking Group chief executive Gail Kelly told a Senate committee into banking competition in January that a ban was "not an overly big deal".
However, Treasury Department executive director of markets group Jim Murphy on Wednesday said the big four may be holding back their concerns on the move.
"They may be putting a good face on something," he told the Senate committee’s final hearing, held in Sydney.
"One of the institutions is continuing to argue, saying that that’s a poor policy response by the government."
Mr Murphy said Treasury’s discussions with one of the major lenders that had removed exit fees revealed serious consequences.
"We have had consultations with one of the major banks who have told us they have had significant loss of business since they removed exit fees," he said, without naming the bank.
"I can’t argue with that. We’ve got to take them on face value.
"But what they said to us was `we think we’ve got a good product out there, we think our policy of consumers first is going to win us the day, and we think our wind up of mortgages will return back to what we think it should be even though it will be higher than what we had when we had exit fees’.
"So I think it (the proposed ban on exit fees) has had a competitive impact."
Treasury officials defended the reforms in Wednesday’s hearing, and said increased public debate sparked by the reforms was already improving competition among the banks.
Mr Murphy said Treasury had investigated "super profits taxes" on financial institutions in place in European countries and the United States, but that was not an indication the federal government was considering a similar move.