Virgin Money: remove support for the major banks

Retail banking challenger Virgin Money Australia says the "limited emergence" of new players in the industry is "disappointing", and the existing system of support for the four major banks could deter new competitors.

In its submission to the Senate banking competition inquiry yesterday, Virgin said new entrants had "made some progress in deposits and mortgages". But they had not achieved a strong position in transaction accounts, the core products on which banks base long-term customer relationships.

The government should also consider "requiring reduction of retail banking assets by the big four banks", something it said had occurred elsewhere.

In other submissions to the inquiry yesterday:

* Competition law expert Brent Fisse submitted a dissection of laws against "price signalling", arguing that they raise complex legal problems and could be futile in practice. Whatever laws are passed, "the fundamental underlying problem of oligopolistic interdependence will remain", Fisse's submission says.

* Law firm Malleson Stephen Jaques argued that the current Trade Practices Act gives the Australian Competition and Consumer Commission enough power to deal with price signalling. The submission also back broader exemptions from interest withholding tax and warned that heightened regulation of finance could be scaring away potential new competitors.

* Economist Frank Zumbo presented a 12-point plan based on heavier regulation of the four banks, additional support for institutions beyond the Big Four, and a Canadian style lenders' insurance scheme. The plan includes a specific power for the ACCC to break up companies, including banks, which have substantial market share in a market with limited competition.

* Commercial property lender Think Tank Property Finance argued that the big banks' institutional arms "provide essential wholesale funding lines to a broad cross section of secondary lenders". Beyond that, the financial system needs to revive securitisation for business loans rather than just residential mortgages, its submission says.