The Customer Owned Banking Association (COBA) welcome the Australian Government’s revised Statements of Expectations for the Australian Prudential Regulation Authority (APRA). COBA has advocated extensively for recognition of the mutual structure in regulator mandates, and the Government’s expectation for APRA to consider different businesses models begins to embed the crucial diverse model of customer owned banks into regulatory policy development.
Mike Lawrence, CEO of COBA, highlighted the significance of this announcement, stating, “This is a crucial step towards ensuring that customer-owned businesses, including customer-owned banks, are considered by default in policy and decision-making. It will further prevent assumptions of an investor-owned business model during regulation development and will support a stronger customer-owned banking sector that offers market-leading customer satisfaction and support beyond its size to communities around Australia.”
Section 4.3 of the revised Statement of Expectations outlines the Government’s expectation that APRA “minimise the costs and burdens of regulatory requirements for regulated entities, including by applying proportionate requirements, considering different businesses models, and taking a principles-based approach to regulation, ultimately to benefit consumers.”
The increasing pace, volume, and complexity of regulatory change has posed challenges for all financial services entities, but it’s the smaller banks, including customer-owned banks, that have been disproportionately impacted. To compete on a level playing field with investor-owned banks in Australia, the customer-owned model needs effective recognition and understanding.
“COBA has been advocating for this recognition for some time, and we are pleased that the government has taken this important step. Embedding the knowledge of the customer-owned model into regulator decision-making and applying principles of proportionality to regulation will benefit the broader population and promote business model diversity as a source of systemic stability and resilience in the banking sector,” Lawrence said.
Research shows that business model diversity is an important aspect to systemic stability. The UK’s Centre for Financial and Management Studies has highlighted the importance of diversity as a neglected source of systemic stability and resilience, with UK regulators required to consider and report on their compliance with business model diversity. The government’s announcement will help ensure that Australia also recognises the value of business model diversity in the banking sector.
COBA looks forward to further discussions and collaboration with the government and regulators to ensure that the customer-owned banking sector continues to thrive and provide a strong alternative for consumers in Australia.
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