The Customer Owned Banking Association (COBA) has welcomed the release of the Council of Financial Regulators’ (CFR) issues paper, which forms part of a larger review by the Treasurer into the challenges faced by small and medium-sized banks.
COBA CEO Michael Lawrence (pictured above) describes the review as a “once-in-a-generation opportunity” to create a more balanced and diverse banking system in Australia.
“This review is a chance to empower consumers with greater choice and reshape the Australian banking landscape,” Lawrence said.
The CFR paper highlights the outsized influence of investor-owned banks, which control 84% of Australia’s banking assets through just nine institutions.
By contrast, Australia’s 55 customer-owned banks – including mutual banks and credit unions – make up less than 6% of the banking system.
Lawrence emphasised the need for proportional regulation.
“Customer-owned banks offer a powerful counterpoint to the investor-owned banking model,” he said. “It’s vital that regulators recognize this distinction when crafting rules for the banking sector.”
The review will also examine the cumulative regulatory burden on small and medium-sized banks. While COBA supports the government’s upcoming regulatory grid for improving transparency, Lawrence said more action is required.
“Better coordination and prioritisation across government can help smaller institutions compete with larger banks,” he said. “A holistic approach to regulatory changes is essential.”
The CFR’s paper underscores the importance of competition in banking, recognising that small and medium banks play a crucial role in supporting their communities.
“Customer-owned banks are fundamental to a thriving and competitive retail banking market,” Lawrence said. “We provide an alternative to shareholder-driven banks, offering purpose-led banking that prioritises people and communities.”
This review stems from the treasurer’s broader efforts to address concerns raised in the inquiry into promoting competition and economic dynamism.
The inquiry’s findings highlighted how large banks stifle competition, often to the detriment of smaller institutions and consumers.
With more than five million Australians relying on customer-owned banks, the sector is optimistic that this review could lead to meaningful reforms, ensuring a more equitable and diverse banking landscape.
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