Banking association calls for ‘regulatory grid’

With the recent series of initiatives for stronger regulations in Australian banking – including APRA’s new bank capital framework and the FRAA’s first review into ASIC, the Customer Owned Banking Association (COBA) has publicly embraced this as “clear progress”. However, the industry body is calling for more to be done. 

As per a statement supplied by the banking association, greater steps are needed to “ensure Australia has a world class approach to financial regulation”. 

COBA chief executive Michael Lawrence said: “The critical next step is for policymakers and regulators to commit to transparency and effective coordination of regulatory change.” 

One direction suggested by COBA is for a “regulatory initiatives grid” based on the UK model first introduced in May 2020 as a means to help financial firms better prepare for upcoming regulatory work. 

According to Mr Lawrence, this Australian equivalent could set out the financial services regulatory work plan over the next two years in a single document, covering “all significant regulation, supervisory and data initiatives and would classify them according to operational impact on firms”. 

“This tool would allow policymakers and regulators to better consider the cumulative impact and timing of regulation,” Mr Lawrence added. 

“Regulation will continue to change as technology and the financial system evolve so it is critical that Australia has a world class approach to financial regulation that purposefully manages this regulatory change to minimise any unintended costs and consequences.

“We have had positive discussions about the ‘grid’ idea with Treasury, APRA, ASIC and the RBA and with the government. We urge the government to commit to the concept and allocate resources to fast-track its development and implementation.”

Mr Lawrence noted one impetus for this grid is how customer-owned banks are competing in an oligopoly “where the four major banks hold substantial market power over their competitors and consumers”. 

He added that this “constant ratcheting up of regulatory compliance costs”, combined with an “increasing diversion of scarce resources to meet new compliance obligations” impacts smaller banks the most, while providing an advantage to major banks – something that ultimately harms competition, innovation and consumer choice.

“The ultimate losers from this entrenched trend are customers who need a vibrant, dynamic and innovative retail banking market,” Mr Lawrence said.  

“Improving regulator accountability has been a consistent theme in our advocacy agenda.

“The regulatory grid will ensure that all policymakers and regulators take a whole-of-system approach to the regulatory change agenda for retail banking to ensure that it is proportionate, orderly and coordinated.”