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Customer-owned banks welcome Government’s review into banking competition


“We welcome the Treasurer’s focus on the role small and medium banks play in providing banking sector competition and look forward to working with the Government to explore ways to ensure consumers have access to a diverse range of banking options,” COBA CEO Michael Lawrence said. 

“Customer-owned banks are essential to Australian banking, providing customers with competitive alternatives and ensuring they have options when it comes to service and products. The customer-owned banking model also gives Australians the choice to bank with purpose-led financial institutions centred on helping customers and the communities they serve,” he added. 

The Government has tasked the Council of Financial Regulators (CFR) in consultation with the ACCC with reviewing the regulatory challenges faced by small and medium sized banks. The review will propose ways to improve regulation and ensure it balances competition, innovation, and stability. 

The review is in response to the final report of the Inquiry into promoting competition, economic dynamism and business formation. The report details concern about major banks leveraging their scale ‘to squeeze out competition to the detriment of consumers’ and found that customer-owned banks were ‘disproportionately affected by the compliance burden of regulation.’ 

“While the customer-owned model is fundamentally different from the shareholder-owned banks, we are regulated in the same way. We recognise that regulation is critical to protect consumers and ensure financial safety, but what we ask is that regulation takes into consideration different models, as well as the size and complexity of a bank,” Michael Lawrence explained. 

COBA’s 55 member banks, which include mutual banks and credit unions, range in size from 20 to 2000 employees, whereas the ‘big four’ employ between 36,000 to 50,000 staff each. 

BankWAW – a credit union headquartered in Wodonga – appeared at the Inquiry and told the Committee that 80 per cent of new roles in its business of 90 people were related to supporting risk and regulatory frameworks. Beyond Bank, a larger mutual bank operating in multiple states, has shared in an inquiry that a quarter of its profits are spent on regulatory costs. 

The final report found that ‘the obligations of regulatory compliance could force them [customer-owned banks] to direct resources away from areas of natural competitive advantage, such as customer service, innovation, and attractive product pricing.’ 

“In essence, in its current form, regulation is slowly depleting our sector’s competitive advantage, because customer-owned banks have to allocate disproportionate resources to compliance, rather than servicing our customers and communities,” Michael Lawrence said. 

COBA has recently raised concerns with regulator APRA on its proposed targeted changes to ADI liquidity and capital standards, which could have adverse impacts on some smaller banks and could ultimately be detrimental for competition. 

“We are concerned the proposed changes will erode vital competition in a market dominated by a handful of major players, and we look forward to clarity from APRA on how it will address our concerns,” Michael Lawrence says. 

A decade ago, financial services regulation, while complex, did not have the same pace and volume of regulatory change. Since then, a Royal Commission, various inquiries, and exponential technological change have created wave after wave of regulatory change. 

“Customer-owned banks have been providing financial services centred on people and communities for almost 180 years. Notably, no customer owned banks were called before the Financial Services Royal Commission. However, the ensuing regulation, and its ongoing evolution, continues to disproportionately impact customer-owned banks,” Michael Lawrence said. 


COBA’s Chief Executive Officer, Michael Lawrence, is available for interviews. For further information or to arrange interviews, please contact Mira Palomaki on 0459 954 035 or media@coba.asn.au 

The Customer Owned Banking Association is the industry body for mutual banks, credit unions and building societies. For almost 180 years our sector has put customers first, returning profits to more than 5 million Australians who put their trust in customer-owned banks. 

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