Another inquiry is underway to look at unfair trading practices from Australian banks, but this time, the Royal Commission will not lead it.
The Australian Competition and Consumer Commission (ACCC) announced this week that it is launching an investigation into how fairly some brokers behave in levying fees on investors trading Forex.
The ACCC said that there is a need to investigate how competitive brokers are regarding their rates on foreign currency pairs and how easy it is for a new competitor to join the market.
Clarifying that the inquiry will center on how brokers display exchange rates to customers and which rates customers can actually access compared to what should be available on the market, the ACCC will bring these matters to public attention for the first time. It will also focus on mark-ups applied to currency pairs and prices.
ACCC Chairperson Rod Sims said that it is important to look into how “major companies in Australia, including the Big Four banks, seem to be able to charge consistently high prices.” He suggested that unfair practices were stifling competition and preventing the average trader from being able to access the appropriate prices.
Discussing the “big part of the price consumers pay,” Sims went on to comment on how the prices that people see when looking at up-to-date exchange rates through a trusted website or search engine bear little resemblance to the actual figures charged when going ahead with a transaction.
These issues necessitate an investigation so that the ACCC can get the answers that it seeks from Australia’s banks. Sims said that there is little transparency in the matter, which is unlikely to encourage consumer trust.
As well as their relevance to Forex traders, the practices under inquiry also affect many Australians looking to go on holiday and buy their foreign currencies before their departure. The ACCC’s comments surrounding its announcement indicate that it believes that the current situation is unfair to these individuals.
A Capital Economics study released last year suggested that a significant chunk of levied Forex fees valued at A$3.9bn went to the banks in 2016 alone, and a $3.1bn of the total came from card charges for transactions and conversion rate mark-ups.
The ACCC’s news comes at a time when the financial sector as a whole is still reeling from the Royal Commission inquiry, which released its interim report last month. The inquiry showed widespread financial misconduct was rife in some cases, which led to criminal and legal proceedings as well as the removal of several top executives from their posts.
With unfair practices appearing to be taken more seriously across the board, it would seem that this message has now spread to the foreign currency sector and put it in the spotlight. The Big Four banks are under scrutiny again, and many observers will have an interest in seeing how they fare.
Meanwhile, a report from the World Bank earlier this year supported the ACCC’s claims of expensive charges. It revealed that Australian Forex fees were above average when compared to those of the G20 and even higher than the global average. The ACCC’s report should come out in spring 2019.