Royal commission tests smalls banks
QUEENSLAND’S small lenders see a double-edged sword with the upcoming banking royal commission.
A key concern is the commission could spatter all lenders with wrongdoing from major banks, lugging smaller rivals with any subsequent public backlash or regulatory response.
But chief executive officers of small lenders also see the commission as offering an opportunity to benefit by differentiating themselves from the Big Four.
The Turnbull government last month announced a commission would investigate any misconduct from banks and other financial service operators, such as insurers or superannuation-linked industries.
It followed disquiet over a drip of scandals, including NAB and ANZ admitting to rigging some bank bill rates.
The Australian Bankers’ Association, led by former Queensland Premier Anna Bligh, said the Big Four banks had called on the federal government to hold a “properly constituted inquiry” partly to “minimise more serious risk” to the sector.
The draft terms of reference include examining the extent of any misconduct or behaviour that “falls below community standards”.
Martin Barrett, CEO of Bundaberg-based Auswide Bank, said the worst-case scenario would be any problems are seen as sector-wide as opposed to problems with certain lenders.
“We end up with reputational damage that extends across the whole industry,” Mr Barrett said.
He said small lenders could have problems, but argued his 23-branch shareholder-owned institution concentrated on risk culture to quickly identify any issues.
Rob Goudswaard, CEO of Australia’s biggest customerowned lender, Brisbanebased CUA, said: “The big risk for us is being viewed the same as a big bank.”
That could be in the public or legislators’ eyes. A bad legislative response would be a uniform “blunt instrument … which works against us big time”, he said.
Aileen Cull, CEO of Townsville-based Queensland Country Credit Union, a 33-branch and outlet lender, said another risk was an inquiry did not offer any clear resolution or finality.
But she said the commission was an opportunity for the smaller players to reinforce the argument that they were a major-bank alternative. The commission was examining motives, so she argued customer-owned institutions such as QCCU would have “a good story to tell”.
Ms Cull acknowledged problems could strike smaller players, but said she would be surprised if any systemic breaches were to emerge.
Big banks have more than 75 per cent market share and Auswide’s Mr Barrett said a good outcome would be if the commission process started to loosen that tight hold.
Mr Goudswaard also said one hope was the commission might trigger people to think that smaller players were different to large banks.
History indicates small banks have trouble prompting any defections: despite scandals, customer satisfaction with Big Banks was at almost 80 per cent the highest level in almost two decades, according to Roy Morgan Research.