Firstmac hamstrung by banking act

Mortgage lender Firstmac has called for the removal of ownership restrictions preventing it from applying for an ADI licence.

In a submission to the Financial System Inquiry, Firstmac managing director Kim Cannon notes that ownership of ADIs is governed by the Financial Sector (Shareholdings) Act 1998 (the FSSA), which limits the shareholdings of an individual shareholder or group of associated shareholders in an ADI to 15 per cent of the ADI's voting shares.

“No other country in the world imposes this ownership restriction which effectively acts as a barrier to entry for groups such as Firstmac wishing to transition,” Mr Cannon said.

The Firstmac Group - which is 100 per cent privately owned - is restricted in applying for an ADI licence due to the cap on individual ownership sitting at 15 per cent.

“The banking act and its shareholder limitations is stifling much-needed competition in the banking sector,” Mr Cannon said.

“It is the entrepreneurs that drive innovation and reduce consumer costs in the market place through the introduction of technological advances that drive down cost of delivery, improve service and provide greater choice for consumers,” he said.

Mr Cannon also noted that access to capital was critical for the survival of the non-bank sector.

“Without access to capital, the number of ADIs will continue to decline as a result of the need to consolidate to survive,” he said.

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