Following the federal government's freshly-released banking reform package over the weekend, Reserve Bank of Australia (RBA) governor Glenn Stevens aired his reservations on the active role that authorities are set to play, in the name of promoting lower interest rates and better competition environment in the sector.

Stevens cautioned the government on Monday that its planned banking interventions could bring about repercussions that may surpass its expectations as he reminded that providing guarantee to mortgage securities would unnecessarily put to risk Australian taxpayers.

His comments came out a day after Federal Treasurer Wayne Swan revealed the government's banking reform measures, which essentially advocated more banking competition and better equity in the sector.

Testifying before the Senate inquiry on Australia's banking system, Stevens expressed puzzlement that the government had opted to nudge taxpayers on harm's way when it decided to back federal provisions for private finances.

Yet he conceded that only the government and the parliament would eventually determine if the move would prove beneficial for the Australian economy and the banking industry.

Stevens told the senate committee that funding and securitisation in the industry have changed tremendously following the global financial crisis three years ago and the rising costs had effectively altered the competition environment among the country's financial institutions.

He noted that within the banking sector's existing conditions, "the current relationship between variable mortgage rates and market funding costs in particular is making it harder for those lenders that rely on securitisation or wholesale funding to compete with the major institutions that have a more diversified funding base."

In order to further enhance such prevailing financial environment, the government is envisioning the technical transformation of some 20 credit unions and building societies as operational banks, a move it stressed as paving the way for healthier competition that could eventually pull down the industry's interest rates.

Also, Swan said that banks' mortgage exit fees would be prohibited by July next year and bank clients would be allowed to keep their account numbers should they decide to switch banking service providers.

More so, the reform package would empower the Australian Competition and Consumer Commission (ACCC) to probe on allegations of price signalling among the country's major banks as the government pledges the allocation of up to $4 billion to support residential mortgage securities.