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PC report on banking a welcome wake up call

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COBA today welcomed the release of the Productivity Commission’s draft report into Competition in the Australian Financial System.

“The draft report is a very welcome wake-up call about the state of the retail banking market and the need to take action to promote competition,” COBA CEO Mike Lawrence said.

“The PC report has a welcome focus on consumers and outlines a set of measures to promote competition and to better inform and empower consumers.

“COBA welcomes the report’s endorsement of key points made in our submission including the finding that the major banks have substantial market power and unfair advantages delivered by the regulatory framework and that competition has suffered. The PC finds that the major banks have the ability to pass on cost increases and set prices that maintain high levels of profitability — without losing market share.

“We also welcome the PC’s observations that customer owned banking institutions do not face the same shareholder pressures as other ADIs and tend to charge lower interest rates than the major banks.

“The PC is highly critical of APRA’s “excessively blunt” macroprudential intervention into the home loan market, noting that the intervention has ignored or harmed competition and has seen a decline in competition from smaller lenders in the home loan market.

“The PC finds that the lack of an advocate for competition, when financial system regulatory interventions are being determined, is a mistake that should now be corrected. COBA looks forward to joining the debate about whether this should be the ACCC or ASIC.  We note the PC’s finding that APRA and the RBA have not been included as options since their primary focus should remain financial stability.

“We particularly welcome the PC’s finding that more nuance is needed in the design of APRA’s prudential measures, including directions to ADIs and risk weights for setting regulatory capital levels.

“COBA is positive about the following findings and recommendations and we look forward to engaging with the PC as it moves to drafting its final report due by July:

  • an existing regulator must be given a mandate to take the lead on matters related to competition in the financial system
  • greater transparency around decision making by the financial regulators is essential to ensure accountability and an active consideration of effects on competition
  • APRA should more finely calibrate risk weights to better reflect the risk inherent in individual mortgages
  • ASIC to develop an online tool to inform and empower consumers about the home loan market
  • the Australian Government should include in its Statement of Expectations for financial sector regulators the practice of reviewing, before they are implemented, regulator actions that may have material effects on competition, and
  • APRA to conduct and publish annually quantitative post-implementation evaluations of its macroprudential policies, including costs and benefits to market participants and the effects on competition.

“We look forward to analysing today’s PC report in detail and consulting our members about the next stage of engagement with the PC inquiry.”

Media Release140.43 KB

 For more information please contact:

Daniel McDougall, Senior Manager – Media and Communication

02 8035 8444 or 0407 637 541, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Customer Owned Banking Association is the industry body for mutual banks, credit unions and building societies.  See www.customerownedbanking.asn.au

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