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PC points way to put the customer first in banking

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The Productivity Commission’s report on competition in banking released today sends strong messages to regulators and policymakers that regulation is hurting competition and consumers are paying the price.

The PC says the market power of the major banks is supported by layers of public policy and regulatory requirements. The PC finds that: ‘Regulation is dense and it may act against customers’ interests.’

“The PC is shining a light on a problem that is not well enough recognised – that more and more regulation can be harmful to consumers because it weakens competition,” said COBA CEO Mike Lawrence.

“The PC finds that competition, more than just price rivalry, drives innovation and overall value for customers.

“We wholeheartedly agree with the PC that competition must be allowed to flourish.

“The PC does not see foreign banks and fintechs riding to the rescue so COBA would like policymakers to focus on unleashing the competitive potential of existing challenger banks, including the 74 customer owned banking institutions. This is not suggesting a ‘free kick’ but rather not being disproportionately impacted through a ‘one size fits all’ approach to regulation.

“The PC recognises that customer-owned banking institutions may be an exception to the pricing behaviour of other banks because we do not face the same shareholder pressures as other banks.

“We want a fair go and that means recognition about the impact of regulatory costs.

“High regulatory costs handicap existing challenger banks and raise barriers to entry.

“High regulatory costs are ultimately borne by consumers. In customer owned banking institutions, every dollar needed to meet regulatory costs is a dollar denied to product innovation, investment in new technology, better service and better pricing.

“Take the example of Open Banking – the benefits of this important reform can be achieved without mandating participation by all banks on an aggressive timeframe.

“Challenger banks have a built-in incentive to participate in Open Banking but they should be able to do so according to their own investment priorities.

“Mandating the major banks is enough to deliver the critical mass that is needed.

“There have been too many examples of regulatory over-reach. The BEAR was aimed at the major banks but all banks are hit. APRA’s crackdown on investor lending had an unfair and disproportionate impact on small banks. Proposed new financial product design and distribution obligations should not be imposed on basic banking products. Again, the cost of compliance will be disproportionate to any potential benefit.

“The PC Report is a valuable reminder that regulatory costs critically affect competition and consumers pay in the end. We call on policymakers to recognise that the cumulative regulatory cost burden in retail banking is disproportionate. It’s time to ensure that all regulatory proposals are tightly targeted at the identified problem and that they are weighed against their impact on competition.

“Keeping regulation proportionate based on size and complexity will allow our sector to grow more rapidly. A stronger and more competitive customer owned banking sector will make the major banks think twice about how aggressively they put shareholders ahead of customers.”

The customer owned banking sector is made up of 74 institutions (mutual banks, credit unions and building societies), with 4 million customers, $110 billion in total assets and 10% of the household deposits market.

Media Release144.56 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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Media Contacts

Mick Gibb
Corporate Affairs Manager
P: +61 2 8035 8444
M: +61 423 149 494
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