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The regional banks’ submission – a collective effort by Suncorp Bank, ME Bank, Bank of Queensland (BOQ) and Bendigo and Adelaide Bank – notes that Basel II may have contributed to the re-direction of bank capital into the higher return/lower risk retail banking market for home lending and away from business lending.
The submission points out that the rest of the banking sector competes hard for housing lending despite the regulatory anomalies that provide the major banks with significant funding and capital advantages.
The dual nature of the capital adequacy regime enables ‘advanced’ banks to hold much less capital against a housing loan than other banks using the ‘standardised’ approach, the submission states.
The regionals recommended a ‘levelling of the playing field’ in terms of capital requirements.
But according to Credit Suisse banking analyst James Ellis, such recommendations are unlikely to come through.
“There is ready access to mortgage finance and it’s often raised that there should be the same access to business finance as there is in mortgage finance. I would be surprised if some players don’t have to go through the extensive processes of systems investments and accreditation that the majors have had to go through to ensure the integrity of mortgage credit risk in Australia, which is critical because it is such a large part of the banking system,” Mr Ellis said.
“I would be surprised if that concession was given,” he continued.
“I can’t see a desire to promote further capital being poured into the mortgage market.
“It’s not like there is a lack of capital or access to consumer credit in Australia.”
All ADIs are currently in the process of becoming accredited for capital adequacy prudential standards, Mr Ellis added.
“They didn’t start this process in the mid-2000s, because the banks were told January 1 2008 they had to be ready,” he said.
“The regionals have just started later, therefore they will finish later.”