Foreign banking institutions in Australia are eager to take advantage of a more competitive environment in the country's financial sector that the Federal government is considering to implement.

International banks, comprised by ING Groep NV, Citigroup Inc, among others, which only had about 10 percent of the mortgage loan business in Australia, are ready to undertake more banking functions given a chance by the Australian financial regulators.

The opportunity to expand their banking services in Australia has stemmed from an imminent row among the country's four major banks and the Federal government led by Treasurer Mr. Wayne Swan as to how they should price their lending rates.

Mr. Swan vowed on Wednesday to go after 'arrogant' banks.

According to Wall Street Journal, ING Bank Australia see it as an opportunity for all the players. Competition will raise the bar in terms of rendering services and rates that would be beneficial to customers and industry players as well.

Commonwealth Bank of Australia, Westpac Banking Corp., Australia & New Zealand Banking Group Ltd., and the National Australia Bank Ltd. came under scrutiny of Australian lawmakers for imposing higher interest rates beyond the Reserve Bank's benchmark rates.

CBA has aggressively jacked up its mortgage rates to 7.81%, an increase of 0.45 percentage point-0.2 percentage point beyond the central bank's increase earlier the same day. This had been very disappointing to Australian consumers, who have to shoulder A$100 more for an average $300,000 mortgage.

Citibank, according to WSJ, had issued Australian residential mortgage-backed securities, which was a very rare issuance this year.

Currently, Citibank has an Australian mortgage book of A$7.5 billion, data from the Australian Prudential Regulation Authority said.

Government guarantees for mortgage-backed securities is one of the regulatory changes being discussed and should increase demand among investors, the report said.