Yes Minister,
There are a very large range of things that the government could do to loosen up the financial sector and allow a more competitive market and the banks could get a conscience and develop an interest rate system as you suggested. Then at the next major world crisis (and only a fool would suggest there won't be one) our banks can proudly join the ranks of the international banking system and need massive government bailouts and crippling bad debt.
Yes, you may have guessed. I am not a supporter of tinkering with the banking system and not by this government. Changes need to be well thought out and are not needed in the areas the government are poking around. We pay a bit more than many other countries but we have a much smaller market restricting the variety of product available. This and the stability due to the regulation of the financial sector in this country give us one of the more inflexible banking systems but also the most stable of systems.
I often say on other subjects, i am happy to pay a bit more to have the job done right and in the financial sector that is stability and security. If you were a big investor i bet you wouldn't be happy with any changes.
Perhaps we should change the laws over how executive bonuses are paid. Rather than it being based on profit, branch closer and staff retrenchment let's make it relative to the product performance and customer retention rates. Then the bankers might get a bit more creative.

What rot nairbe!

By the time of any crisis all the excessive profits generated by the currant rip off by the banks will have been disbursed in excessive wages for quite a few, & dividends to shareholders. There will be damn all left to cover any crisis.

The banks will be somewhat weaker, as many of their customers will be much closer to defaulting, after years of very high bank charges & interest rates, prevent them establishing a safety margin in their financial affairs.

Why shouldn't bank interest rates be controlled. They could be offered the choice of "no chance of taxpayer bailout, & charge what they like", or " charge an agreed rate, & receive guarantees next time they are broke".

They lived with a government set rate for housing loans for many years, it gave a much smaller margin than today's rates, but they did still make profits.

From memory, in the 60s, I received 3.25% interest on my passbook account, & payed 4.75% on my home loan. Of course, this margin would probably not fund multi million pay rates. We all could happily wave the existing bank management good by, as they flew off, looking for better rip off territory, & high pay, overseas.

Personally, I would probably even donate towards their airfare, & definitely would, if they would take our super fund managers with them, as hand maidens.

*For these lenders the rate could easily be discounted by a few percent*

SM, that in fact already happens. Somebody borrowing 90% would
have to take out mortgage insurance, at substantial cost.

Homes loans are already heavily discounted, compared to say
SME loans, because of that lower risk.

Fact is that banks are facing increased interest costs on deposits,
as well as increased overseas loan costs.

I spent alot of time watchning the banking inquiry and what it has
perhaps done is clarify banking for many of the unaware. No skeletons
revealed from any closets, no rip offs.

Joe Hockey made a lot of noise about the big 4 banks, but without
reason, it seems.

What was interesting were the comments from the chairman of APRA.
If you have too much competition, credit quality drops, just as
happened in the USA and Britain. And what is far worse then healthy
banks is banks going broke.

Perhaps politicians should focus on our overpriced houses and the
reasons for that. If the average house was 100k$ cheaper, then
mortgages would be much smaller. That remains the elephant in the
room.

Hasbeen,
Wake up my friend this is reality not a 60's acid party.
Peoples finances are in the state they are in because people are greedy and want more than they can afford. Also they pay far too much for housing helping to push prices to probably 40% over inflated. Amazing how people always need someone to blame., and if what you say is right then the banking system would have collapsed during the GFC.

I agree executive wages are out of control, that is why i suggested they be pinned to performance markers that matter, try reading what i said. Controlling interest rates is a fine idea if you want our economy to really go third world. From memory during the eighties we floated the dollar, deregulated banking and now the reserve bank uses interest rates to control inflation. These are the realities try building your home economy on the facts not 60's dreaming.

Now as these are simple facts it doesn't make them my favoured way. Personally i think the whole economic system is appalling, but as i am not an economist and have only limited understanding of economic mechanics i will have to leave it up to them, try to understand the best way i can manage in that environment and be thankful that though not perfect and somewhat expensive, our banks are stable and service the limited available market. With a mere 22 million people in Australia it is fortunate we have four major banks.