Australia calls for more competition, capital for major banks

Cameron Spencer | Getty Images

Australia on Tuesday accepted most key recommendations of a government-backed inquiry which called for more competition and stronger capital reserves for the nation's four major banks as well as reforming the $1.2 trillion superannuation system.

The review, chaired by former Commonwealth Bank of Australia head David Murray, last year called on Australia's major banks to raise additional capital to ensure they become among the world's safest lenders.

Australia's "Big Four" lenders - CBA, Westpac, ANZ and National Australia Bank - which hold a combined market share of more than 80 percent, have raised more than A$20 billion so far but will need to set aside a similar amount over the next two to three years, analysts estimate.

"We are constantly focused on ensuring from a prudential point of view that our banks as financial institutions are safe ... that's critical for the whole economy," Prime Minister Malcolm Turnbull told reporters on Tuesday.

Australian banks survived the global financial crisis that began in 2008 relatively unscathed and have been generating record profits in recent years, largely on the back of massive mortgage books.

The government will also look at improving "competition, efficiency and transparency" in the A$1.7 trillion ($1.23 trillion) superannuation system to boost after-fee returns for fund members and help provide more retirement income products to retirees.

Read MorePetition to rename the Australian dollar to the 'dollarydoo'

Australia's so-called super funds have, on average, returned 7.1 percent over the past five years, according to government data.

The government said it would limit excessive charges for bank and credit cards, also recommended by the inquiry.