Regulation unfairly impacts smaller banks: MyState

Jessica Yun
— 1 minute read

Australia must reform regulations that have a “disproportionate impact” on smaller banks and limit competition, says Tasmania-based banking and wealth management group MyState.

Speaking last week at MyState Limited’s annual general meeting, chairman Miles Hampton called for the government to “level the playing field” and said that smaller banks were being “hamstrung” by regulation.

“Regulatory changes are having a disproportionate impact on smaller banks,” Mr Hampton said in his address.


“APRA’s ‘speed limit’, restricting all banks’ investor lending to 10 per cent annual growth and interest-only lending to 30 per cent of flows, has disproportionately constrained smaller banks’ ability to grow.

“The larger banks’ investor loans are typically 35–45 per cent of their mortgage portfolios, while smaller banks’ investor loans are around 20–25 per cent of their loan portfolio.

“Instead of creating competition, this regulation has handed larger banks an advantage, as rates on investor and interest-only loans increased.”

He added that government regulators had a role to play in promoting more competition in the banking sector and should have a mandate to promote competition within the banking sector.

The chairman said: “While there has been discussion about the conflict between targeting of financial stability and competition, in our view, effective competition should not increase risk to the financial system in a well-regulated environment.

“We challenge the notion that it is natural for a few large players to dominate the banking market.”

He added that it was the smaller banks that were “nimble, achieving productivity benefits through technology, and providing competition in the market”.

“The market is crying out for that competition.

“But smaller banks are being hamstrung by additional regulatory intervention.

“More regulation is not necessarily better regulation.”


Regulation unfairly impacts smaller banks: MyState
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