In evidence before yesterday’s public hearing of the House of Representatives Standing Committee on Economics inquiry into promoting economic dynamism, competition and business formation, the Customer Owned Banking Association and member banks called for improved regulatory coordination to lessen the burden on smaller banks and to build a stronger platform for competition.
COBA’s CEO, Mike Lawrence, addressed key concerns of the Committee around the concentration of capital and economic power – especially during a time of high inflation – and the role of customer-owned banks in providing competition with major banks for better customer outcomes.
“Scrutiny on the lack of competition in the banking and financial services sector has increased recently, from both sides of politics and as observed through the 2019 royal commission. As customer owned banks we welcome the focus of this inquiry on competition, having long advocated about overconcentration of market power to the major banks and the negative impact it has for customers,” Lawrence said.
“The customer-owned sector is essential to keeping Australian banking competitive and ensuring customers have options when it comes to first-class service and products.
“Collectively, we manage more than $160 billion in assets, are the fifth largest holder of household deposits and household lending, and account for two thirds of domestic authorised deposit-taking institutions – all while delivering market leading customer satisfaction in the retail banking market.”
As part of the submission made on behalf of its 56 members, COBA highlights the challenges customer-owned banks are navigating in the face of increasing regulatory requirements. Regulatory activity can disproportionately impact smaller banking institutions which are less able to absorb the peaks and troughs of poorly coordinated actions.
“To reduce the impact of regulatory change on smaller banks, and free up resources to invest in customer-focused initiatives, a new regulatory coordination mechanism should be introduced that outlines changes across multiple financial services regulators, similar to the United Kingdom’s Regulatory Initiatives Grid,” Lawrence said.
“The volume of regulatory change will only continue to grow as the risk environment becomes more complex and dynamic. The introduction of an Australian Regulatory Roadmap will assist regulators and policymakers to coordinate regulatory change will benefit the wider economy by helping banks of all sizes to plan and accommodate for more efficient regulatory change and freeing up resourcing for essential growth initiatives.”
Mr Lawrence also called out the ‘group think’ of investor-owned banks that currently dominate the market and subsequent regulator mandates, highlighting the risk of an environment that assumes the default of these business models in policy and decision-making.
“We are also calling for more recognition of the customer-owned banking sector overall, to promote a diversity of business models in banking that drives competitive services for Australians and provides a broader range of innovative solutions to better serve customers.”
COBA’s full submission can be found here.
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