Mike Lawrence

The Customer Owned Banking Association’s (COBA) submission to the Senate inquiry into regional banking branch closures highlights the sector’s commitment to regional Australia, and outlines what it considers the best way forward for regional banking.

Michael Lawrence, CEO of COBA, said customer-owned banks are extremely conscious 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,” Mr Lawrence said.

“Our sector operates the largest regional branch network in Australia with 21 per cent of all regional branches, despite a 3.5 per cent 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.”

Analysis of the June 2022 APRA Points of Presence data has also shown that the sector reduced its regional branch footprint at a much slower rate of 1.7 per cent, compared to 5.5 per cent for the total regional network, in the 2021-2022 financial year.

During the Queensland public hearings held in Cloncurry and Ingham^[1]over the past 2 days, the inquiry has heard from customer-owned banks who gave evidence on their innovative approaches to providing financial services in regional Australia, while also highlighting the real challenges facing branch networks.

As part of the submission made on behalf of its 56 members, COBA has called for improved banking regulatory coordination to lessen the burden on smaller banks, and the 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,” Mr 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 opposes two policy solutions currently being canvassed by some stakeholders – a government-owned bank, and a community service obligation – considering them 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. 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,” Mr Lawrence said.

“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.”

Read the submission. 

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Notes:
[1] https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Rural_and_Regional_Affairs_and_Transport/BankClosures/Public_Hearings

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