Small lenders ask for a chance to compete with the big four

COMMUNITY banks, credit unions and even powerful lenders, including those operating throughout regional Queensland and New South Wales, are attempting to take on the big four banks, which are considered "too big to fail" after the Global Financial Crisis.

In a submission to the Federal Government's Financial System Inquiry, Bendigo Bank, Suncorp, Bank of Queensland and ME Bank proposed a levy for Australia's largest banks to give smaller lenders a chance to compete.

A charge for the big four is backed by the Customer Owned Banking Association or COBA, which includes Queensland Country Credit Union, Heritage Bank and Bananacoast Community Credit Union as members.

The Financial System Inquiry is to consider how banking should be reformed - if at all - to ensure it keeps up with the needs of Australians while remaining strong against foreign competition.

COBA chief Louise Petschler said Australians were subsidising the country's biggest lenders.

"The current financial system gives some of the world's most profitable banks billions of dollars in funding advantages for free," she said.

She referred to a report by Morgij Analytics which estimated that advantage to be worth $2.5 billion.

In its submission, the Commonwealth Bank pushed for clarification on superannuation regulations.

An interim report by the FSI is due in mid-2014.

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