The Customer-owned Banking Association (COBA) has called the current weight of compliance that small banks are under a ‘python squeeze’ on the industry.
COBA made the claims in a submission to the Senate Committee on Australia as a Technology and Financial Centre, in which they said that they environment that has been created is putting undue pressure on neobanks and customer-owned banks, who have less capacity to comply that their larger counterparts.
“It’s quite a broad submission, where we are asking for regulators and government to consider regulation more broadly,” said Michael Lawrence, CEO of COBA.
“At the same time, we’re talking about the impact that it has on competition. We have a blizzard of regulation and compliance which is consuming the smaller organisations.”
“It’s not so much complying, because they can do the work. One of the advantages of being smaller is that you can be nimble and agile if you don’t have the big legacy systems, but that said, you have limited resources.”
“When I say that, I’m talking not just in money but also bodies, the sheer number of people to do the work. We’d never say that we don’t want to be regulated, but we’re calling for more proportionate regulation because the burden sits more heavily with smaller organisations due to the fixed cost nature of regulation.”
Consumer Data Right (CDR), a component of new Open Banking regulations, is seen as something that is hard to implement. Indeed, the CEO of Fintech Australia, Rebecca Schot-Guppy, recently told Australian Broker of the delays that many ADIs had in getting their compliance where it needed to be.
“It goes to the point: when you’re small, you have limited resources to call upon,” said Lawrence. “Take for example the requirement to bring Consumer Data Right to market.”
“It’s a very complex piece of work, and while we’re a big supporter and advocate of it, it consumes a significant amount of resources in a smaller organisation. We don’t have large teams. Neobanks are not sitting there with tens of thousands of employees.”
“It’s also difficult for large organisations – any regulation is – but when you’ve got finite resources, the smaller you are the more difficult it is.”