COBA welcomes action on 'too big to fail' problem
COBA welcomes APRA’s announcement today proposing higher capital requirements for major banks to improve financial safety, financial system stability and competition.
“This is APRA’s response to recommendation 3 of the 2014 Financial System Inquiry to reduce any implicit government guarantee and the perception that some banks are too big to fail,” said COBA CEO Michael Lawrence.
“The proposed response is better late than never and we note that APRA is proposing to give the major banks until 2023 to implement the measure.
“APRA estimates the total funding cost impact from increasing major bank capital requirements would not be greater than five basis points in aggregate.
“Again, this is better than nothing and any move to level the playing field is welcome.
“The implicit guarantee provided by taxpayers to the major banks gives them an unfair funding cost advantage over their smaller competitors and distorts competition.
“Reducing unfair advantages for the biggest players in the market is good for competition and a more competitive market will benefit consumers.
“APRA’s announcement today notes that the increased capital requirement on major banks will reduce the potential need for government to support a failing bank.
“We look forward to consulting our members on APRA’s discussion paper and providing a submission in due course."
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Customer Owned Banking Association is the industry body for mutual banks, credit unions and buliding societies.