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Australia's competition watchdog opens inquiry into forex services

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A Royal Commission inquiry into Australia's big banks and wealth managers has shined a harsh light on financial institutions, revealing widespread misconduct and deception of customers.

Sydney

THE Australian Competition and Consumer Commission (ACCC) said on Tuesday that it had opened an inquiry into price competition among suppliers of foreign currency conversion services and would investigate the ability of potential entrants to compete.

The ACCC said that the inquiry would examine the ways exchange rates are presented to customers as well as the mark-up from wholesale currency rates that buyers are charged when changing currencies.

"We will be examining why major companies in Australia, including the Big Four banks, seem to be able to consistently charge high prices," ACCC chair Rod Sims said.

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"The exchange rate you Google is not the exchange rate you get from the Big Four banks. The difference is known as the 'mark-up', and it's often a big part of the price consumers pay when converting currency," he added.

A 2017 study by consultancy Capital Economics found that Australian consumers and businesses paid out about A$3.9 billion (S$3.87 billion) in foreign currency fees in 2016, of which more than A$3.1 billion was in exchange rate mark-ups and card spending charges applied by banks and brokers to international transactions.

A powerful Royal Commission inquiry into Australia's big banks and wealth managers has shined a harsh light on financial institutions in the country, revealing widespread misconduct and deception of customers.

The Australian Banking Association said that the inquiry's interim findings marked "a day of shame for Australia's banks" with "no excuses for the behaviour that has been exposed by the Royal Commission".

A World Bank report published in June said that the cost of sending money overseas from Australia was higher than both the Group of 20 nations and global averages.

Australia had migrant remittance outflows of about US$6.36 billion in 2016, according to the World Bank.

The ACCC said that it will submit its final report to the Treasurer by May 2019. REUTERS