Increased competition is one of the proposed measures the Government and regulators see as a means of tackling what appears to be systemic misconduct in the financial sector, post-Royal Commission.
The Australian Prudential Regulation Authority (APRA) is expected to play a major role in this space with their measured approach to balancing competition and stability, especially in the banking sector.
Earlier this week, APRA Chair Wayne Byres addressed attendees at the Customer Owned Banking Convention (COBA), speaking both to APRA’s role in monitoring the sector and highlighting that some of the smaller Authorised Deposit taking Institutions (ADIs) have seen advantages post-Royal Commission when it comes to keeping their own reputations intact.
In fact, one of Byre’s key points was the growth of the mutual banking sector in Australia.
Recently, the sector underwent a risk assessment by the Australian Transactions Reports and Analysis Centre (AUSTRAC) and was found to pose a medium risk to the market in relation to money laundering and terrorist financing. This is the same rating given to the superannuation industry a few years ago.
Despite this, opportunities for the sector seem to be increasing after it came through the Royal Commission relatively unscathed.
“This factor is contributing to the slow but steady erosion in the dominance of the majors,” Byres explained. “At the same time, the long-term decline in the share of mutual appears to have definitely ceased and, albeit slowly, mutual are starting to win back market share. For example, the share of housing loan approvals generated by the mutual sector is the highest it has been since the GFC, and broadly double that of a decade ago.”
Byres continued, “There is undoubtedly a real opportunity for the mutual sector to take collective advantage of its favourable perception. Working together is also important, from a defensive perspective. There are many headwinds—economic, political and technological—facing the banking sector. Some are real and present dangers that must be faced today; others pose material threats to financial system if they were to play out adversely. And at least some of them will be felt by smaller firms most forcefully.”