Government-commissioned review recommends lightning regulatory burden for small and medium-sized banks
Australia’s seventh-largest mortgage lender Bendigo and Adelaide Bank has backed recommendations put forward by the Council of Financial Regulators (CFR) to increase the competitiveness of smaller lenders.
Published last week, the CFR’s Review into Small and Medium-sized Banks outlined nine changes to the current regulatory regime that the Labor Government should enact to promote the competitiveness of smaller lenders.
The CFR is calling for a proportional approach to regulation to ease reporting and compliance burdens for smaller lenders.
One recommendation, for example, is for the government to remove small banks from the requirement to automatically report certain breaches to the Australian Securities and Investments Commission (ASIC).
“Bendigo Bank is pleased to see its recommendations relating to proportional regulation and access to covered bond funding endorsed by the CFR, which will enhance competition and deliver improved customer outcomes,” said the bank’s chief executive and managing director Richard Fennel.
In its submission to the CFR’s initial review, Bendigo and Adelaide Bank called for the imbalance between ‘Standardised’ and ‘IRB’ banks to be reduced.
‘Standardised’ and ‘IRB’ (Internal Ratings-Based) refer to two different approaches that banks can use to calculate their regulatory capital requirements for credit risk.
Larger banks with the means to calculate risk internally tend to use the IRB approach, which typically allows them to hold less capital. This is seen as an unfair advantage for the larger banks.
“However, we are pleased to see APRA will review its IRB accreditation process to increase transparency and introduce further flexibility,” said Fennel.
“Bendigo Bank’s purpose is to feed into the prosperity of our more than 2.7 million customers and the communities in which they work and live,” Fennel added.
“The Bank is proud of its 160-year heritage which has delivered more branches per customer than any other Australian bank.”
Of the nine recommendations put forward by the CFR, Labor Treasurer Jim Chalmers has thrown his support behind eight.
“We will seek feedback on the final recommendation for APRA (the Australian Prudential Regulation Authority) to introduce a lighter touch framework for very small banks, accompanied by adjustments to the Financial Claims Scheme,” Chalmers said of the one outlier.
It is up to the relevant regulatory bodies to enact the proposed changes.
