A new report has identified problems with one-size-fits-all regulation in banking and warned of the impact more regulation flowing from the Royal Commission could have on consumers, competition and smaller banking institutions.

A new report has identified problems with one-size-fits-all regulation in banking and warned of the impact more regulation flowing from the Royal Commission could have on consumers, competition and smaller banking institutions.

The Grant Thornton Report, A case for proportionate regulation, finds the fixed costs of regulation place a heavier burden on smaller institutions and that this limits opportunities for growth and there is a real downstream impact on consumers.

The Report found: 

  • Increased regulation comes with fixed costs which disproportionately impact smaller banking institutions
  • These obligations cannot be deferred, and have implications for growth and innovation for smaller banking institutions
  • A possible unintended consequence of increased regulation targeted at ensuring satisfactory outcomes for customers, is that it harms the very institutions which have had the customers at the heart of their businesses, and
  • Regulation should be better targeted to both the size and risk profile of banking institutions. 

COBA CEO Mike Lawrence said the report was an important contribution to the current banking policy debate.

“This report shows that regulatory costs have a real impact on challenger banks and therefore on competition and consumer choice,” Mr. Lawrence said.

“Banking must be strongly regulated but excessive regulatory costs harm competition and consumers ultimately pay the price.

“We want to work with policy makers on a better approach and we will have more to say on that in coming days.” 

Darren Scammell, Financial Services Leader – Victoria, Grant Thornton Australia said:

“The Royal Commission will have implications for how risk to the consumer is minimised in the banking sector – most likely through regulation and additional resources, such as a Principal Integrity Officer.

“However, the level of risk isn’t the same across the sector, nor are the resources to carry the burden of additional regulation and requirements. For instance, we know of one credit union that hasn’t foreclosed on even one mortgage in more than 40 years. Compare this to one of the big banks which could have upwards of 900,000 mortgages on its books. The risk is disproportionate, and the regulation to safeguard consumers should be proportionate to reflect this.”

The Grant Thornton Report is available here.

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Further enquiries, please contact:

Therese Raft
National Communications Manager
Grant Thornton Australia
T+61 2 8297 2724
therese.raft@au.gt.com