Customer-owned banks call on regulator to drive competition but leave limited space for brokers
Customer-owned banks call on regulator to drive competition but leave limited space for brokers
APRA should encourage competition between banks as one of its key roles, according to the Customer Owned Banking Association (COBA).
In a submission to the Government’s Productivity Commission, COBA claimed that a ‘secondary competition objective’, backed with an accountability scheme, would prevent smaller banks being disproportionally disadvantaged by regulation.
“We do not doubt that APRA already gives some consideration to competition but we judge this to be inadequate and inconsistent”, commented COBA director Luke Lawler. He pointed to the implicit guarantee of major banks, the gap in mortgage risk weights and the impact of APRA’s 10% investor lending ‘speed limit’ as examples.
Addressing the Senate in June, APRA chairman Wayne Byres explained that “APRA has no mandate to create or impose standards in relation to its ‘balancing considerations’ (that is, efficiency, competition, contestability and competitive neutrality).”
However, Byres argued that smaller banks had simpler liquidity and statistical reporting requirements and looking to simplify licensing for prospective new entrants.
The role of brokers
In its submission, COBA noted the growing importance of brokers, quoting ASIC on the impact of vertical integration on brokers, although COBA did not elaborate whether brokers would be included in APRA's competition objective.
Whilst brokers have promoted themselves as increasing competition in the industry, ASIC’s Review of Mortgage Broker Remuneration reported that “individual broker businesses had four preferred lenders, which received 80% of loans (by value) from that business.”
Customer-owned banks have been slow to work with brokers; as recently as 2015, COBA publicly criticised brokers, claiming they “fall a long way short of delivering the best result for the customer.”
Despite this, COBA are a core member of the Combined Industry Forum, which will recommend changes to broker commissions to the Government in November.
ACCC already on the case
Australia already has a competition regulator and it is already looking at the banks.
In May, treasurer Scott Morrison ordered the Australian Competition and Consumer Commission (ACCC) to look at home loan pricing in the mortgage market. The move followed anger at bank interest rate rises despite the RBA gradually reducing the cash rate.
The ACCC’s investigation will not report until 2018, however, and only covers mortgages.
APRA should encourage competition between banks as one of its key roles, according to the Customer Owned Banking Association (COBA).
In a submission to the Government’s Productivity Commission, COBA claimed that a ‘secondary competition objective’, backed with an accountability scheme, would prevent smaller banks being disproportionally disadvantaged by regulation.
“We do not doubt that APRA already gives some consideration to competition but we judge this to be inadequate and inconsistent”, commented COBA director Luke Lawler. He pointed to the implicit guarantee of major banks, the gap in mortgage risk weights and the impact of APRA’s 10% investor lending ‘speed limit’ as examples.
Addressing the Senate in June, APRA chairman Wayne Byres explained that “APRA has no mandate to create or impose standards in relation to its ‘balancing considerations’ (that is, efficiency, competition, contestability and competitive neutrality).”
However, Byres argued that smaller banks had simpler liquidity and statistical reporting requirements and looking to simplify licensing for prospective new entrants.
The role of brokers
In its submission, COBA noted the growing importance of brokers, quoting ASIC on the impact of vertical integration on brokers, although COBA did not elaborate whether brokers would be included in APRA's competition objective.
Whilst brokers have promoted themselves as increasing competition in the industry, ASIC’s Review of Mortgage Broker Remuneration reported that “individual broker businesses had four preferred lenders, which received 80% of loans (by value) from that business.”
Customer-owned banks have been slow to work with brokers; as recently as 2015, COBA publicly criticised brokers, claiming they “fall a long way short of delivering the best result for the customer.”
Despite this, COBA are a core member of the Combined Industry Forum, which will recommend changes to broker commissions to the Government in November.
ACCC already on the case
Australia already has a competition regulator and it is already looking at the banks.
In May, treasurer Scott Morrison ordered the Australian Competition and Consumer Commission (ACCC) to look at home loan pricing in the mortgage market. The move followed anger at bank interest rate rises despite the RBA gradually reducing the cash rate.
The ACCC’s investigation will not report until 2018, however, and only covers mortgages.
