Treasurer Wayne Swan has announced his banking reform package, which will see a shakeup of the way home loans are constructed and the funding market for smaller lenders.

Under the program, home loan exit fees will be abolished on all new home loans from July 1, 2011. Account portability will also be examined, with former RBA governor Bernie Fraser conducting a feasibility study on establishing transferrable account numbers.

The reforms also introduce Swan’s oft-discussed Fifth Pillar. More than 20 mutuals will be approved by APRA to refer to themselves as banks if they so choose, and an awareness campaign will be enacted to alert consumers that mutual deposits carry the same government protection as do bank deposits. Funding will also see a government boost, with $4bn invested in high-quality, AAA-rated RMBS. The development of bullet RMBS will also be accelerated, to allow smaller lenders to diversify their sources of funding. Swan has commented that this funding will ease Australia’s reliance on overseas markets.

“The problem is that we are too reliant structurally on overseas funding,” Swan said in his announcement of the reforms. “Bullet bonds, corporate bond market, covered bonds, are ways of lessening our reliance on overseas investing and marshalling the savings of Australians and getting it reinvested in our system, and in doing that providing some competition for the big banks.”

Shadow Treasurer Joe Hockey has criticised the reforms, calling them piecemeal and warning that they could actually harm smaller lenders.