A large banking lobby has told a senate inquiry that it is critical that regulators treat different models of bank ownership equally.
Speaking in front of the Senate Economics Committee Inquiry into cooperative, mutual and member-owned firms, the chief executive of COBA, Mark Degotardi, said policy makers too often only consider two models for the delivery of products and services to consumers – delivery by the Government on the one hand, or by the shareholder-driven private sector on the other.
“There are other viable models – the co-operative or customer owned model being one of them,” he said.
“But for these models to be truly viable, they have to be considered when regulatory frameworks are developed, not squeezed into regulatory frameworks designed for listed banks or other institutions, often as an after-thought.
“And it is critical that regulators treat the different models of ownership equally.”
Recognition and consideration is critical, says Degotardi, for competition and choice.
“Diversity of ownership brings more competition to the market. Co-operatives and customer owned banking institutions make ethical and responsible decisions with a long-term perspective, not decisions based on short term profit maximisation.
“And competition brings choice and reduces concentration risk in the banking market – this is better for consumers and better for the stability of the economy.”
According to Degotardi, the customer-owned banking model continues to provide a real alternative to the major banks, despite being “hobbled by a regulatory regime”.
“The average standard variable home loan rate for owner occupiers in our sector is 69 basis points lower than the average advertised standard variable rate offered by the four major banks. That difference equates to a saving of around $160 a month on a 25 year, $400-thousand mortgage,” he said.
“Our sector’s pricing is determined by the need to run strong, sustainable businesses where we balance the interests of our borrowers and our depositors. There is no tightrope for us – we come down on the side of the consumer every time.
“Our sector provides competitive pricing and a real alternative despite being hobbled by a regulatory regime that benefits the largest banks and doesn’t adequately consider the customer-owned model.”