THE lingering effects of the federal government's soon-to-disappear bank funding guarantee will cost the Bank of Queensland $30 million a year in pre-tax profits and hamper its competitive position for another four years, its managing director, David Liddy, said yesterday.
The banking industry has welcomed the end of the guarantee at the end of the month.
However, Mr Liddy indicated he would continue to campaign against its continuing costs.
The annual fees levied by the government for the use of its AAA credit rating will last for the term of the debt raised by the banks - the charge will include the price differential between the higher-rated major banks and lesser regional banks.
The guarantee was introduced in October 2008 when international and domestic debt markets froze during the global financial crisis. Using the government's sovereign credit rating was the only way that banks were able to raise money to maintain lending in the months immediately afterwards and they were charged according to their own credit ratings.
The recent recovery in debt markets has reduced the need for the guarantee and it will be withdrawn on March 31.
The BoQ, rated BBB, has been paying 80 basis points (0.8 per cent) more than the big four every time it raised money from debt markets.
However, Mr Liddy said investors were charging an additional 15 to 25 basis points because of the bank's lower rating and the perceived credit risks involved.
The resulting higher costs almost wiped out the bank's profit margins on its home loans.
Such lending had a ''tremendous impact'' on the competitiveness of smaller institutions in the mortgage market.
''The disadvantage we have faced under the guarantee's pricing will become an albatross around our neck and that of competition in Australian banking well into 2014,'' Mr Liddy said.
The big banks would only get bigger and this would help entrench a ''Coles v Woolworths-style of oligopoly in banking'', he said.
He called for the regionals to be charged at the same rate as the majors. ''We just want a level playing field. We don't want hand-outs, we don't want a leg-up. We just want a fair go.''
