The Customer Owned Banking Association (COBA) welcomes the release of the Council of Financial Regulators’ (CFR) issues paper, which is part of the Treasurer’s review into challenges faced by small and medium sized banks.
“This review is a once-in-a-generation opportunity for regulators and the Government to reshape the Australian banking landscape. It’s a chance to create a truly diverse banking system, that empowers consumers with greater choice,” COBA CEO Michael Lawrence said.
The CFR paper acknowledges the dominance of investor-owned banks in Australia, with 9 institutions controlling 84% of banking system assets. Australia’s 55 customer-owned banks, which include mutual banks and credit unions, make up less than 6% of the banking system.
The paper highlights the importance of proportionality, and notes ‘proportionality is about ensuring regulation is commensurate to risk’.
“Customer-owned banks offer a powerful counterpoint to the investor-owned banking model, but it’s important that regulators understand this difference when they create rules for the banking industry. We believe this dominance has led to a view of ‘investor owned’ by default in policy and decision-making, and we are hoping this review will result in a more balanced and nuanced approach to regulation,” Lawrence said.
Importantly, the review will also consider the cumulative burden placed on small and medium banks by regulatory frameworks.
“Although we welcome the Government’s forthcoming regulatory grid as an important first step towards transparency, more needs to be done. Better-coordination and prioritisation across government will support smaller entities to compete with their larger counterparts and allow specific changes to be considered from a holistic perspective,” Lawrence explained.
The CFR acknowledges ‘a competitive banking system is critical to Australia’s long-term prosperity’, and ‘small and medium banks are key contributors to competition and their communities.”
“Customer-owned banks are fundamental to a diverse, thriving and competitive retail banking market in Australia. Our sector provides a distinct alternative to shareholder-owned banks, offering consumers purpose-led banking that puts people and communities first,” Lawrence said.
Customer-owned banks serve more than 5 million Australians and have been providing purpose-led banking for almost 180 years.
The Treasurer launched the review following the report from the Inquiry into promoting competition, economic dynamism and business formation. The report raised concerns about major banks stifling competition to the detriment of smaller institutions and consumers.
COBA’s Chief Executive Officer, Michael Lawrence, is available for interviews. For further information or to arrange interviews, please contact 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.