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Customer-owned banks welcome Parliamentary report which finds regulatory burden a threat to competition


The Customer Owned Banking Association (COBA) and its member banks welcome the findings of the Better Competition, Better Prices report from the House of Representatives Standing Committee on Economics following its inquiry into promoting economic dynamism, competition, and business formation.

As part of its investigation into the concentration of capital and economic power in banking, the Committee found the obligations of regulatory compliance adversely impacts customer-owned banks, ultimately threatening competition in the banking sector1.

COBA CEO Michael Lawrence said: “The customer-owned sector is essential to keeping Australian banking competitive, and ensuring customers have options when it comes to service and products. We welcome the findings which acknowledge that the regulatory burden is a disproportionate threat to customer-owned banks.”

For example, BankWAW – a credit union based in North East Victoria and Southern New South Wales – told the Committee that 80 per cent of new roles in its business of 90 people were related to supporting risk and regulatory frameworks.

“It can be challenging for smaller banks to efficiently resource constantly changing regulatory standards. Proportionate regulation allows smaller banks to invest in improvements for customers and provide much-needed competition in the banking market,” Michael Lawrence said.

The Committee noted that greater competition in the banking sector would ‘benefit consumers through more innovative and competitive products and enhanced economic dynamism2.’

In total, COBA and nine members appeared in front of the inquiry.

“We thank the Committee and in particular Chair of the Committee Dr Daniel Mulino MP and Deputy Chair Garth Hamilton MP for their work on the report. We are grateful for the time they took to listen to our members, and for emphasising the importance of healthy and strong competition in banking as it ultimately benefits all Australians,” Michael Lawrence said.

The Committee made 44 recommendations in the report, including supporting the introduction of a Regulatory Grid. The Government announced earlier this month it will be introducing a Regulatory Grid, which will create benefits across the whole financial services sector including greater

transparency and the ability to better plan and allocate resources. COBA has relentlessly advocated for the Regulatory Grid since 2021.

Australian customer-owned banks, including building societies, mutual banks and credit unions have been delivering financial services centred on people and communities for almost 180 years.

“COBA will continue to advocate for more recognition of the customer-owned banking sector overall, and the diversity of banking business models. We look forward to further discussions and collaboration with parliamentarians and regulators to ensure the sector can thrive in driving competition and providing strong, innovative banking solutions for consumers in Australia,” Michael Lawrence said.

COBA’s Chief Executive Officer, Michael Lawrence, is available for interview. For further information or to arrange interviews, please contact media@coba.asn.au.

  1. 6.102 in report: However, the Committee is troubled by the significant difference in profitability between the major banks and the smaller banks. Scale and diversification clearly confer significant advantages but the Committee also recognises the potential for major banks to leverage this scale to squeeze out competitors to the detriment of consumers, especially in the area of residential mortgages, and businesses. For smaller and customer-owned banks, the obligations of regulatory compliance could force them to direct resources away from areas of natural competitive advantage, such as customer service, innovation, and attractive product pricing. This situation does not reflect well on competition in Australia’s banking sector. ↩︎
  2. 6.10 in report: Hearing the perspective of customer-owned and non-major banks was important, because they are disproportionately affected by the compliance burden of regulation. The Committee heard that a regulatory roadmap could improve the ability of smaller entities to compete. This greater competition would, in the view of many witnesses, by extension benefit consumers through more innovative and competitive products and enhanced economic dynamism. ↩︎

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