The latest Grant Thornton report revealed some loopholes in the one-size-fits-all regulation for banking, and at the same time, it emphasised the impact that more regulation from the Royal Commission might have on consumers and smaller lenders.
Entitled A case for proportionate regulation, the study highlighted how inflexible regulations can restrain smaller banks’ opportunities for growth.
COBA CEO Mike Lawrence said the report was essential, as well as timely, considering the current debate on banking policy.
“This report shows that regulatory costs have a real impact on challenger banks and therefore on competition and consumer choice,” Lawrence said.
“Banking must be strongly regulated but excessive regulatory costs harm competition and consumers ultimately pay the price.”
Darren Scammell, Grant Thornton Australia’s Financial Services Leader for Victoria, held a similar point of view and underscored the major role that the Royal Commission plays in this scenario.
“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,” he added.
The report also found that increased regulation comes with fixed costs, which disproportionately impact smaller banking institutions – even those that have not been found to engage in the same behaviours which prompted the Royal Commission in the first place.
In light of this, the report recommended that regulation should be better targeted to both the size and risk profile of banking institutions.
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