CUA applauds measures to promote competition in financial services

GUEST OBSERVER

The government’s response to the Financial System Inquiry is good news for consumers and will help promote a competitive and diverse banking and financial landscape and we congratulate the government on accepting the majority of Inquiry Chair David Murray’s recommendations, which were handed down in late 2014.

The recent announcement by the government is good news for customers and will continue to enhance the integrity, competition and transparency in our financial system in Australia.

I’m pleased to see there will be a stronger focus on competition in the sector, through the inclusion of competition in ASIC’s mandate and also through the commitment to review competition in the financial system by the end of 2017.

CUA hopes this is just the beginning, and that we will see a continued focus on competition going forward, including regular rolling reviews of competition within the financial system.

We welcome the requirement for transparency around vertically integrated financial advice and mortgage broking businesses, owned by larger banks, and for higher standards in financial advice and acknowledge the steps the government and regulators, including the Australian Prudential Regulation Authority (APRA), have already taken in recent months in response to recommendations which came out of the Inquiry.

The government’s decision earlier this year to not proceed with a levy on deposits was a sensible outcome which was in the best interests of Australians and customer-owned institutions like CUA.

Likewise, I’m pleased to see the government has endorsed the steps already taken by APRA towards requiring the majors to hold more capital against home loans and the release of a discussion paper on capital levels for ADIs. Both of these are positive outcomes for consumers and customer-owned lenders like CUA.

CUA looks forward to APRA implementing the broader international work on risk weights for mortgages - the so called Basel 4 approach - which could enable our sector to allocate more appropriate levels of capital to customers with lower loan to valuation ratios. This tailored approach has been missing from our repertoire and will be a major step forward for mutuals given our focus on the customer.

The CUA would seek further details on some of the proposed actions and how they would impact CUA, including changes to the definitions around term deposits.

We look forward to continuing to work closely with industry stakeholders, regulators and the Government on implementing these measures so Australians can continue to enjoy a strong, secure and competitive financial services landscape. 

Rob Goudswaard is Chief Executive Officer, CUA and can be contacted here.