HomeMedia & ResourcesMedia Releases‘Perfect storm’ of low interest rates and banking regulation threatens competition

‘Perfect storm’ of low interest rates and banking regulation threatens competition


The Customer Owned Banking Association (COBA) is calling on Federal Government to reconsider the approaching wave of banking regulation as the low interest rate environment squeezes competition.

“Very low interests hurt savers and banking competition,” says Michael Lawrence, CEO of COBA. “As the banking regulator APRA has warned, the worsening margin squeeze caused by very low rates hits smaller banks harder than the major banks.

“This is due to our reliance on deposit funding, which is derived from the hard-earned savings of our customers.

“The margin squeeze reduces our capacity to apply competitive pressure. The very low rate environment makes it tougher to balance the needs of our savers and borrowers.”

COBA looks forward to the Government stepping in with a stimulus package to ease pressure on the RBA for another rate cut.

“To promote banking competition, the Government should think carefully about phasing and targeting the enormous wave of regulatory change queued up for implementation over the next few years,” said Mr Lawrence.

“Our members, who would rather focus on customer service, are managing relentlessly rising regulatory change and complexity.”

“We are seeing a perfect storm as reforms from the Royal Commission converge with changes to APRA’s prudential regulatory framework.”

COBA notes the sweeping changes to breach reporting requirements and the Financial Accountability Regime stemming from the Royal Commission, in conjunction with APRA’s changes to governance, risk management, outsourcing, business continuity, recovery and resolution, climate change financial risk, stress testing, credit risk, capital and public disclosures.

Other major regulatory compliance challenges for customer owned banks in the near future include the Consumer Data Right and Design and Distribution Obligations.

“Each new regulatory compliance deadline diverts resources from strategic priorities such as responding to technological change and customer expectations,” said Mr Lawrence. “Consumers ultimately bear the cost.

“We call on the Government to more systematically assess the cumulative cost burden of continuous regulatory change in banking, particularly on customer owned banking institutions.”


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