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APRA has ‘failed’ on competition: COBA

apra    apra
Staff Reporter 6 minute read

The prudential regulator has failed to give due consideration to competition in the banking industry, argues the Customer Owned Banking Association.

Discussing the Customer Owned Banking Association's submission to the Productivity Commission (PC), director Luke Lawler said that there were a number of “failure[s]” on APRA's part to address concerns regarding competition.

“There is a problem with competition in the banking market,” stated COBA’s submission to the PC.

APRA’s failures included a “lack of urgency in addressing market distortions caused by the unfair funding cost advantage enjoyed by the major banks” and perpetuating major gaps in “mortgage risk weight settings” between large banks and smaller institutions, Mr Lawler said in the statement.


Another example of “failure” was the “implementation of macro-prudential measures affecting investor lending that rewarded major banks which had expanded their investor lending portfolios most aggressively before the cap was applied”, according to Mr Lawler.

In its submission, COBA pointed to “three primary causes” for the lack of competition: “the major banks’ lower cost structures, the sector’s high barriers to entry and customer inertia”.

“Major banks benefit from a regulatory system that has helped to embed their dominant position,” the submission stated.

“The lack of competition has significant adverse consequences for the Australian economy and consumers.”

COBA’s submission also highlighted the need for further research into the barriers hindering switching, and “to design interventions to reduce these barriers in the most cost-effective way”.


Mr Lawler said that customer-owned institutions were “strongly support[ive]” of measures that would encourage customers to switch.

“COBA recommends rigorous market studies of retail banking product markets, taking into account consumer behaviour and behavioural biases, to identify the barriers to switching and to design interventions to reduce these barriers in the most cost-effective way,” Mr Lawler said.

“Consumers play an important role in driving competition by comparing different products and switching to the one that is the best value for them,” the submission said.

“Customer inertia limits effective competition.”

[Related: Brokers provide regional lenders with 'plenty of opportunities': APRA]

APRA has ‘failed’ on competition: COBA
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James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.



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