Less regulation needed for competition: COBA

The Productivity Commission’s (PC’s) report on competition in the finance industry shines a welcome light on the issue that “more and more regulation can be harmful to consumers because it weakens competition,” the Customer Owned Banking Association (COBA) has said.

The PC found that the layers of regulatory requirements in banking is “dense” and supported the market power of the major banks, meaning regulation “may act against customers’ interests”.

COBA called on policymakers to improve competition by decreasing regulatory costs, which it said “handicap challenger banks and raise barriers to entry,” therefore limiting competition.

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“The PC does not see foreign banks and fintechs riding to the rescue so COBA would like policymakers to focus on unleashing the competitive potential of existing challenger banks, including the 74 customer-owned banking institutions,” COBA chief executive, Mike Lawrence, said.

“This is not suggesting a ‘free kick’ but rather not being disproportionately impacted through a ‘one size fits all’ approach to regulation.”

Lawrence also believed that regulatory over-reach had impacted challenger banks unfairly, pointing to the Australian Prudential Regulation Authority’s (APRA’s) crackdown on investor lending as having “an unfair and disproportionate impact on small banks”.

He said that proposed new financial product design and distribution obligations shouldn’t be imposed on basic banking products, as “the cost of compliance will be disproportionate to any potential benefit”.




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