The Commonwealth Bank has taken aim at the Reserve Bank's role as a transactional banker to the federal government, claiming that a key financial regulator should not also compete with the private sector.
While state governments have outsourced their banking needs 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 these commercial banking services and it would raise its concerns with the Treasurer.
CBA, which was government-owned before its privatisation in 1991, also argued that the Reserve had 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 that 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.
At present, only institutions that are 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 - from making use of 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.
Under current laws, the Reserve must provide banking services to the Commonwealth where needed.
Federal government departments can choose to use a private bank 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 CBA submission said the central bank's role as a provider of financial services was relevant to the Reserve's proposal to loosen credit-card access rules.
The comments come as institutional bankers compete fiercely for government business, amid low demand for credit.