Home' Connexus : Issue 45 Contents Heritage Bank CEO John Minz has no doubt that,
since the GFC, the pendulum has swung too far
towards stability. He says a healthy banking sector
needs a bigger dose of competition and innovation.
"We need to have a debate that sends a more
balanced message about the focus of our prime
regulator in managing what I call a healthy
Harper notes that fallout in securitisation
markets during the GFC led to "a rush back to the
balance sheets of the major banks".
In turn, smaller lenders that had previously
relied on securitisation for funding have str uggled
to get capital.
"However you want to cut it, the smaller institutions
are regarded as riskier and therefore don’t get the
breaks the bigger guys get," says Harper. "[The
smaller institutions] say there will be a cost in terms of
effciency and competition and innovation, and I think
they are quite right about that."
CUA chief executive Chris Whitehead says his
institution and others have been working closely
with COBA to highlight problem areas for the
sector, with the risk-weighting issue being of
The FSI must address the signifcant advantages
major banks receive in the amount of regulatory
capital they are required to hold against home
loans, he says.
"It does rub that we are required to hold 35 per
cent of the regulatory capital and the majors are
holding 17 or 18 per cent, so they only require half
the capital backing for essentially the same assets,"
says Whitehead. "Most inspections highlight that,
if anything, the mortgage books of the mutuals
are outperforming the mortgage books of the big
banks. So that looks quite per verse."
WAW Credit Union chief executive Peter Challis
says such a disparity between the big and smaller
institutions is clearly wrong.
"We apply the same [loan-to-value ratio], yet we
have to have extra capital.
“That’s a nonsense – so the application of that
standard needs to have more fexibility.”
Clearly, the franking credits and multibranding
issues also stick in the craw.
Cull says the inability of customer-owned banks
to distribute franking credits is "totally unfair"
and notes that they have been paying tax now for
20 years but, unlike the banks, have no vehicle to
distribute those credits back to members.
"I accept that we have a part to play in paying
tax, but it has become unbalanced because the
franking credits distort the whole distribution of
[that tax] and it means our members are missing
out on a signifcant beneft.”
Walsh concurs: "The customer-owned banking
model shouldn’t be penalised because we’re not
ASX-listed companies. So being able to release
franking credits is really an imperative."
The major banks’ multibranding strategy is
also an issue. The public is largely unaware that
Westpac has the Bank of Melbourne, St George,
BankSA and mortgage broker RAMS in its stable;
the Commonwealth owns BankWest and has
majority control of Aussie Home Loans; and NAB
Minz wants the inquiry to recommend changes
to ensure clear disclosure of such sub-branding in
advertising. “That’s on the nose and that needs to
Minz argues that, in the interests of a healthier
banking system, the FSI should examine the role of
the pr udential regulator.
He claims APRA has been "on steroids" since the
GFC, hoping its regulation and super vision will
help prevent corporate collapses such as the HIH
Insurance debacle in 2001, he says.
"They have deprioritised competition because
we’ve been through a GFC and because they haven’t
had the beneft of an inquiry to take additional
public, political and academic debate and direction
on what is a set of key criteria for the best banking
system going for ward."
Minz contends that over regulation stymies
innovation in the fnancial sector. “The banking
system didn’t break during the GFC and it’s even
stronger now, so let’s have a breather.”
A less-encumbered customer-owned sector has
the potential to further challenge the major banks,
“Remove the distraction and we’ll show
you how to do optimal customer relationship
banking, whether it be virtual or face to face or
voice to voice."
Peter Russell, a partner and head of mutuals at
KPMG Australia, says the regulatory framework
could be more scalable, “so a small ADI doesn’t
have to be subject to the same regulatory burden
as a large ADI". He sees the upshot of regulation on
customer-owned banks and corporate boards.
“And the papers for a mutual don’t look that
It's about a
some of the
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