COBA calls for more competition

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The Customer Owned Banking Association has called for financial regulation reforms to deliver a more equitable Australian banking sector.

COBA has released a discussion paper on competitive neutrality in the banking system, highlighting its concerns regarding the increasing dominance of the four major banks.

Louise Petschler, chief executive of COBA, said it is important to recognise that competition and choice are diminishing within Australia's concentrated banking market.

“The regulatory framework is letting down Australian banking consumers if it is hampering competition, and we say that is exactly what is happening," Ms Petschler said.

Competition is important for the overall health of the financial system and vital to the value proposition of brokers.

“Credit unions, building societies and mutual banks provide a genuine alternative to the major banks and we seek no more and no less than competitive neutrality for our mode,” she said.

“If no action is taken to even up the playing field, the major banks will continue to get bigger and to increase their already dominant share of the banking market. It’s a mistake to confuse the strength of the big four banks with the overall health and sustainability of our banking system.”

According to the COBA discussion paper, major banks enjoy an unfair advantage in several areas, including the cost of funding.

“Major banks gain an unfair cost of funding advantage that flows from ratings agencies and investors factoring in an implicit government guarantee,” the paper states.

Ms Petschler called for action to ensure smaller players can function on the same playing field as the larger banks.

“Under the competitive neutrality principle, customer-owned banking institutions should be able to compete on equitable terms with their large listed competitors without being handicapped by unfair treatment or subsidies to competitors,” she said.

[Related: Customer-owned model applauded]

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