Senator Xenophon’s policy measures (Steps 1-4)	Australian Bankers’ Association response
"Step 1 is to review the tax-payer guarantee on wholesale funding and retail deposits," Nick said.  "This guarantee has been stacking the cards in favour of the big banks, driving smaller competitors out of the market."	A number of major bank CEOs have called for the removal of the government guarantees as part of a coordinated international plan. However, some groups are concerned that removing the guarantees would benefit the major banks because the major banks have the strongest credit ratings. For example, the credit union industry body is strongly opposing the lifting of the guarantees.1
“Step 2 is to impose a total limit on executive remuneration packages of $1 million per annum for an employee of a financial institution which is receiving taxpayer support.”	This would have no effect on Australian banks because no banks are receiving taxpayer support. Senator Xenophon has confused Australia with what’s happening in the USA and UK. In the latter two countries, billions of taxpayers dollars have been injected into the banks. This has not happened here. In fact, the opposite is true. Taxpayers are big winners in that banks are paying $500 million per year to the Government in return for the wholesale funding guarantee.
“Step 3 is to pass a law banning banks from charging fees which are not proportional to the costs of the services, with the onus on the banks to justify the charge.”	This policy measure would severely disadvantage low-income groups who depend upon subsidised banking services. These groups include pensioners, students and households receiving welfare support. Passing a law requiring cost-based pricing would wipe out discounted products.
“Step 4 is to limit the amount of interest banks can charge on credit cards to 5% above the standard variable rate set by the Reserve Bank.”	Once again, this policy will disadvantage low-income people and households. It is a throwback to the unfair regulated days. In the 1970s, a major reason for deregulation of banking (including interest rate ceilings and quantity limits) was to advantage low-income people. Up until deregulation, the banking system typically benefited those who were wealthy and disadvantaged those who were poor.