Legislate on ownership disclosure, says lender

In its submission to the Financial System Inquiry, Bankmecu recommends that the Australian government require all bank sub-brand advertising to reveal the owner bank, with the owner bank name and sub-brand shown with equal prominence.

“An Australian survey [Essential Research 2012] found around half of the respondents perceive the existence of smaller banks makes no or little difference to consumer choice,” the submission said, adding that a majority supported bank ownership disclosure.

“Consumers perceive limited competition in the banking sector, and they understand many smaller banks are not real options but merely sub-brands,” it said.

“Regardless, they want to know more about who owns the big and small banks — who is managing Australians’ money?”

Bankmecu noted a gap in consumer education regarding the operation of the government’s $250,000 deposit guarantee through Financial Claims Scheme (FCS) as it relates to ADIs with wholly-owned subsidiaries operating as sub-brands.

“The FCS guarantees deposits up to $250,000 per account holder, per ADI, which means that consumers with deposits adding up to more than $250,000 spread across sub-brands (For example, with Westpac and its St George, BankSA, RAMS and Bank of Melbourne brands) are not provided with the same level of depositor protection that would apply if their funds were deposited across different ADIs,” it said.

“Concern arises from the fact there is no evidence of this being clearly disclosed to consumers by the relevant banks nor readily available or clearly stated on consumer or regulators’ websites.”