The Government is going to make it easier for authorised deposit-taking institutions to call themselves banks, in the hope it will reduce the cost of loans.
Currently only ADIs with more than $50m in capital can call themselves a bank but Treasurer Scott Morrison says this prohibition will soon be removed.
“There are approximately 58 ADIs in Australia that will then be entitled to call themselves a bank, boosting their market appeal and their ability to secure cheaper funds,” Morrison noted. “The benefits to the customer are simple - cheaper loans.”
Morrison pointed to the UK, where easing usage of the word bank in 2013 encouraged the growth of new ‘digital banks’ such as Monzo and Starling. According to Morrison “it led to a flood of new online lenders into the market, forcing the major banks to slash their interest rates and product pricing.”.
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