Kelly sceptical on banking reform impact

Westpac chief executive Gail Kelly has expressed doubt on the extent to which the government's proposed package of banking reforms will increase competition in the sector.

Speaking before a Senate inquiry, Ms Kelly said it was unclear whether the proposals to scrap home loan exit fees and price signalling would improve levels of banking competition, The Australian reported.

"It's difficult to know," she said when asked about the impact of the reform package.

"We are broadly positive on a whole. There are some elements that we are enthusiastic about more than others."

Among the proposals backed by Ms Kelly are plans to strengthen residential mortgage-backed securities as a source of funding for smaller lenders as well as plans to allow covered bonds on a bank's balance sheet.

The federal government is hoping to boost the position of smaller lenders and make it easier for consumers to compare home loans and switch to better deals through its reforms. According to the Westpac boss, the government should also be doing more to encourage saving among people, which would in turn support bank funding requirements.

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