A senate committee looking at small business access to finance has tabled its report and made a number of recommendations including forcing banks to abolish exit fees on variable-rate loans.
The committee was chaired by Liberal Western Australian Senator Alan Eggleston and was established because of small business concerns about the availability of finance.
The committee found that most small businesses borrowed at variable interest rates but that banks did not fully pass on the reductions in interest rates between August 2008 and September 2009.
But the banks did fully pass on subsequent increases.
The committee also discovered that banks have increase fees they charged small business and required greater security for their loans.
"These developments are a reflection of competition for lending to small business having diminished," the committee said in its report.
"Important drivers of this include bank mergers and the difficulties faced by non-bank competitors."
The Committee expressed its concern that bank exit fees on variable-rate loans were an impediment to competition.
Among the recommendations was the possible introduction of guidelines or legislation to force banks to abolish exit fees on variable-rate loans if they refuse to scrap them by the end of 2010.
The committee urged the government to continue to stop any merger between the big four banks.
It recommended a moratorium on any further takeovers in the banking industry for a year unless a bank is at imminent risk of failure.
The committee advocated the Australian Bankers' Association meeting with small business representatives to develop a code of practice for lending to small business.
