COBA welcomes CFR review into small banks

The Customer Owned Banking Association (COBA) has welcomed the release of the Council of Financial Regulators’ (CFR) issues paper, which forms part of the Treasurer’s review into the 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,” said COBA CEO Michael Lawrence.

The CFR paper highlighted the dominance of investor-owned banks in Australia, with just nine institutions controlling 84 per cent of the banking system’s assets. In contrast, Australia’s 55 customer-owned banks, which include mutual banks and credit unions, make up less than 6 per cent of the market.

The paper also stressed the importance of proportionality in regulation, saying that “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,” Lawrence said.

“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.”

A key focus of the review is the cumulative regulatory burden on small and medium-sized banks.

“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 said.

The CFR said that “a competitive banking system is critical to Australia’s long-term prosperity” and that “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 nearly 180 years.

The Treasurer launched the review following a report from the inquiry into promoting competition, economic dynamism, and business formation, which raised concerns about the major banks stifling competition to the detriment of smaller institutions and consumers.

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Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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