Non-major bank chief sends warning to regulators ahead of FSI release

by Julia Corderoy28 Nov 2014
With the final report of David Murray’s Financial Systems Inquiry to be released any day now, the chief executive of a non-major bank has said “consumers will ultimately be the losers” if regulators don’t take action to level the playing field in the banking sector.

Speaking at the bank’s Annual General Meeting, Jon Sutton, the acting CEO of Bank of Queensland said a focus for the bank this year has been working with other regional banks to respond to the Inquiry and fight for changes that will stop the major banks having “huge advantages over the rest of the market.”

“One of the key areas of concern for the regional banks is the regulatory mortgage risk weighting regime, which is completely inequitable. This requires smaller banks to hold significantly larger amounts of capital against housing loans compared to our major bank peers.”

Sutton says it is pleasing to see that their efforts have not been fruitless and the arguments they have made to the Inquiry have gained traction, despite the pushback from the major banks.

“Recent commentary for domestic and international regulators suggest the internal ratings models being used by advanced banks are not reliable and certainly not comparable across banks,” he said.

However, he warns that if regulators don’t take action quickly, then it might be too late.

“While it is pleasing that both the Inquiry and global regulators appear to understand these important issues, we are concerned that the timeframes to implement any regulatory changes could be some years away.

“We would like to see action taken quickly to address this issue, before the dominance of the Big Four is further entrenched. If that happens, Australian consumers will ultimately be the losers.”

Bank of Queensland’s chairman, Roger Davis also cautioned regulators to reassess the need for regulatory intervention to cool the heated Sydney and Melbourne housing markets.

“We must also caution against any macroprudential changes which are designed to address the Sydney and Melbourne markets but may have unintended consequences in other areas where growth is more subdued such as first home buyers, owner occupiers, and other non-East coast cities where housing markets are a key diver of economic activity,” he told shareholders at the bank’s Annual General Meeting.