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Westpac ChiefWestpac head Gail Kelly has welcomed some of the Federal Government’s proposed banking reforms, but has also urged it to do more to encourage saving.

Speaking at a federal parliamentary inquiry into banking competition she said she wants to make it more attractive for people to save money in deposit accounts.

“Levelling the playing field between banking deposits and other currently more tax-favoured savings options will assist,” she said.

She has backed plans to moves to strengthen residential mortgage-backed securities which provide funding for smaller lenders, and plans to allow covered bonds – which are securities that are backed by assets such as mortgages – on a bank’s balance sheet.

She says covered bonds will help lower costs and influence the banks’ interest rates.

“It’s not a panacea for us but it’s an important next step to allow us to leverage our mortgages,” she said.

Westpac expects funding costs for the nation’s banks to peak in about 18 months.

The Government is proposing a range of measures that it hopes will boost competition in the banking sector.

Ms Kelly warned there is a trade-off between stronger competition and the stability of the financial system, and it is crucial to get that balance right.

“In most areas we believe the Australian banking sector is highly competitive, it is also strong and stable,” she said.

“The global financial crisis that we experienced over recent years and the dire economic consequences continuing from banking failures around the world has certainly reminded us how important it is to have a safe and strong banking system.”

Story by Alicia Barry and Simon Cullen www.abc.net.au

Tags: banks, econony, finance, financial, government, reform

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