The industry body's submission to a senate inquiry also highlights its commitment to regional Australia
In a submission to the senate inquiry into regional banking closures, the Customer Owned Banking Association (COBA), the industry body for mutual banks, credit unions, and building societies, has underlined its commitment to regional Australia and outlined what it considers the best way forward for regional banking.
Michael Lawrence (pictured above), CEO of COBA, said customer-owned banks are acutely aware of the importance of regional banking services, with more than half of the sector staffed and headquartered outside of major cities.
“Our members continue to innovate to keep regional branch services open, including co-owning community branches, co-locating with government services, using branches to supplement call centres, and adjusting opening hours to better align with customer behaviour,” Lawrence said.
“Our sector operates the largest regional branch network in Australia with 21% of all regional branches, despite a 3.5% overall asset share. This translates to more than four branches per billion dollars in assets, compared to 0.6 branches per billion for the majors.”
According to an analysis of the June 2022 APRA Points of Presence data, the sector saw its regional branch footprint slashed at a much slower rate of 1.7%, compared to 5.5% for the total regional network, in the 2021-2022 financial year.
During the recent Queensland public hearings held in Cloncurry and Ingham, customer-owned banks told the inquiry about their innovative approaches to providing financial services in regional Australia, while also highlighting the challenges facing branch networks.
As part of the submission, COBA, on behalf of its 56 members, has called for improved banking regulatory coordination to lessen the burden on smaller banks, and for recognition of mutual banking in regulator mandates to ensure regional banking services remain competitive.
“To reduce the impact of regulatory change on smaller banks, and free up resources to invest in customer-focused initiatives, a new regulatory coordination mechanism should be introduced that outlines changes across multiple financial services regulators, similar to the United Kingdom’s Regulatory Initiatives Grid,” Lawrence said.
“We are also calling for the recognition of our customer-owned banking sector in regulator mandates to ensure Australia does not end up with a regulatory environment that assumes the default of an investor-owned business model in policy and decision-making. Instead, promoting a diversity of business models in financial services would drive competitive services for regional Australians, and provide a broader range of innovative solutions to better serve customers.”
COBA expressed opposition to two policy solutions currently being canvassed by some stakeholders, a government-owned bank, and a community service obligation, which it considered as anti-competitive interventions detrimental to the sector’s ability to provide services for regional communities.
“There are calls for Australia Post to obtain an ADI license to compete in the banking market,” Lawrence said. “COBA does not support this on the grounds it will fundamentally disrupt the competitive banking landscape in Australia and lead to worse outcomes for the sector, particularly smaller institutions.
“Similarly, any moves to impose regulatory obligations on the last bank branch in town, of which many COBA members already are, could lead to the acceleration of branch closures as banks look to avoid being the last one standing – which is exactly what we don’t want.”
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