The Council of Financial Regulators (CFR) in consultation with the Australian Competition and Consumer Commission (ACCC) will conduct a review of the small and medium-sized banking sector to examine:
- the role and state of the small and medium-sized banking sectors in providing competition
- the regulatory and market trends affecting their competitiveness and
- current and potential sources of and barriers to competition from these sectors.
Scope
The review will include (but not be limited to) an examination of:
- how mechanisms to mitigate deposit risks and contagion risks (such as the Financial Claims Scheme) may enable more proportionate ex-ante regulation for smaller banks and lower barriers to entry and expansion
- access and costs of funding by small and medium-sized banks, including the impact of current statutory limits on the use of covered bonds and
- the cumulative regulatory reporting obligations from across the CFR agencies for small and medium-sized banks.
The review seeks to include the CFR and ACCC’s views on how competition and dynamism in these sectors can be better supported. As well as what steps may be taken to improve regulation to ensure increased proportionality and an appropriate balance between competition, innovation and stability.
Out of scope
The review will not review matters:
- subject to any current government legislative workstreams (for example, the regulatory initiatives grid, the consumer data right, facilitating mortgage switching, payments regulation)
- outside of the areas of responsibility of CFR agencies (for example, anti-money laundering/counter terrorism funding requirements) or
- relating to agency funding or industry levies.
Final report
The review will likely provide recommendations for consideration of system setting by both the Australian Government and CFR agencies themselves in the independent exercise of their regulatory functions.
The CFR is to provide a final report to the government by 1 July 2025.