Xenophon takes aim at banking competition

by Miklos Bolza21 Sep 2017
Regulations introduced by the Australian Prudential Regulation Authority (APRA) have disproportionately affected competition in the banking sector, skewing the advantage to the big four, said Senator Nick Xenophon.

Speaking at the Community Bank National Conference in Adelaide on 19 September, Xenophon pointed to comments by Bank of Queensland and Bendigo and Adelaide Bank that the “regulator’s tough new lending rules could actually be curbing competition”.

These measures were also “consolidating the power of the big four at the expense of every other local bank and lending institution in Australia,” he said.

“For instance, the new macro-prudential measures that APRA implemented – no interest-only investor loans and a 10% cap of a bank’s books on investor loans – seem to have the effect of consolidating the market power of the big four, while nobbling everyone else.”

He promised to introduce legislation in the coming year to force the Productivity Commission’s inquiry into banking sector competition to a head by requiring APRA to:
  • Include competition in the banking sector within its mandate
  • Consider the differences between Sydney and Melbourne and the rest of the nation
  • Give weight to the impact that small community banks can have
APRA’s current rules to cool overheated housing markets in Australia’s two major cities are “blunt” instruments that fail to take into account the markets in smaller capitals such as Adelaide, regional cities such as Townsville, and rural towns such as Minyip, he said.

“A more nuanced, calibrated approach is needed, and that could be achieved if APRA is required by law, in its objectives, not only to take into account its financial stability mandate, as it must, but secondary factors such as competition in the banking sector.”

Related stories:

Brokers assisting smaller ADIs: APRA

“Bad regulation costs the community”: ASIC

Rate hikes a result of regulation: APRA

COMMENTS

  • by Xavier 21/09/2017 8:43:52 AM

    I think Nick Xenophon is on the money

    It is one thing putting in place Macro prudential regulation however the impact & consequences of every change needs to be measured at every level - from banking competition to the outcome & viability on the distribution channels like the broker channel
    Some of the existing and proposed changes can & will affect the broker channel negatively which will in terms result in negative consumer outcome.

    It would be very ironic & two faced that brokers are measured solely on consumer outcomes however the regulator would be immune of their impact on this level. Same can be said about some of the reviews like the sedgwick review and others.

    I am thinking particularly about the proposed 'Net of offset' proposals.. if this comes into effect - combined with the clawback rules currently in place - these will no doubt influence the advise and recommendations from brokers to consumers due to economic reality. Of course brokers need to be responsible in their recommendation however you might start seeing trends where brokers favour Fixed rate loans, or basic loans with no offset and/or reduced functionality as otherwise they stand to be penalised by potential events out of their control at the time of advice - Like consumers inheriting money, selling businesses or cashing in by other means no always being able to be foreseen at time of loan writing

    A loot of measures taken by APRA end up having direct or collateral consequences or deteriorating consumer outcomes and increasing bank profits potential