Commonwealth Bank has taken aim at the Reserve Bank's role as a transactional banker to the federal government, saying a key financial regulator should not also compete with the private sector.
While state governments have outsourced their banking to commercial banks, the Reserve still transfers $215 billion a year on behalf of government agencies, mainly relating to social security payments, Medicare and tax refunds.
In a submission to the Reserve, CBA said it was "inappropriate" for a central bank to provide such commercial banking services, and it would raise its concerns with the Treasurer. CBA, government-owned before its privatisation in 1991, also argued that the Reserve enjoyed a position that was unfairly protected by legislation.
"Fundamentally, we do not believe that it is appropriate for a supervisor of financial and payments systems, and associated banking activities, to also be a competitor to more commercial institutions participating in this market," it said in a submission to the Reserve.
"Conflicts inherent herein are substantial and best avoided, in our view."
CBA argued economic reform had focused on promoting "market mechanisms", but this was undermined "when a potential competitor is starting from a position unfairly protected by legislation."
The comments were made in a submission in response to a Reserve proposal to loosen the rules on the credit card regime.
Only institutions supervised by the Australian Prudential Regulation Authority can issue and receive Visa and MasterCard credit and debit cards.
But, the RBA argues, these rules are preventing several institutions - including itself - using the credit card access regime.
The Reserve's role as a banker to the federal government has been the subject of long-running debate, with banks pushing for Canberra to follow the states in outsourcing transactional services to the private sector.
The Reserve must, by law, provide banking services to the Commonwealth where needed.
Federal government departments can choose to use private banks, but the Reserve still provides transactional services for welfare payments, tax refunds and payments to government staff. In 2011-12 there were 285 million such transactions, worth $215 billion.
The Commonwealth Bank submission said the question of the central bank's role as a provider of financial services was relevant to the Reserve's proposal to loosen credit card access rules, and it would raise it with the Treasurer "at an appropriate time".
The comments come as institutional bankers compete fiercely for government business, amid low demand for credit by big companies.