Challenger banks fear unintended consequences

by Rebecca Pike01 Feb 2019

Groups are urging politicians to think carefully before implementing any changes after the Royal Commission report, with fears new policy could harm competition and affect positive customer outcomes.

In an open letter, the Customer Owned Banking Association (COBA) and its member organisations called for the government to remember that the regulatory responses to the final report impacts more than the big four banks.

Smaller banking institutions are concerned that recommendations in the final report will be designed to address problems in the ‘Big Four’ and may have unintended consequences for smaller lenders.

COBA CEO Michael Lawrence said that proportionate regulation is the best way to address the issues brought to light during the Royal Commission hearings.

“Addressing the issues of poor customer outcomes, lack of competition and greed can only be achieved with a proportionate approach to regulation,” he said.

“Responding with a broad brush approach to regulation that fails to recognise the different types of models out there will make it harder for smaller operators to exist and will ultimately reduce competition. That’s the last thing consumers need.

“Regulation may not necessarily be new legislation, but also a one-size-fits-all approach by regulators that are in a race to be the toughest cop on the beat.

“Competition isn’t just about having more players in the market, it’s about making sure each and every player has an equitable opportunity to compete against one another.

“A more competitive customer owned banking sector will make the ‘Big Four’ think twice about how aggressively they put shareholders ahead of customers.”

Lawrence said the customer-owned model has always existed to put customer interests first, not shareholder interests.

He added, “Rather than pay out dividends to shareholders, customer owned banks reinvest profits back into benefits for customers through lower interest rates, lower fees, innovative technology and better services.

“Our model isn’t conflicted about who we are working for. The interim report of the royal commission was emphatic when it said banks put profits before people. In our model it’s people that come before profits.”