ALBURY-Wodonga's smaller financial institutions – and their customers – could suffer if blanket regulations are enforced in the wake of the royal commission into the industry, WAW's chief executive believes.
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Michael Mack said regulators needed to be careful of unintended consequences which could negatively effect small companies, and “entrench the dominance of the big financial institutions”.
Kenneth Hayne this week made made 76 recommendations for sweeping reforms across the industry, challenging key aspects of banking, superannuation, financial advice and the rural lending industries.
“If you’re a multibillion dollar organisation it’s fairly easy to absorb the cost of adding a couple of people into the organisation to develop new compliance reporting,” Mr Mack said.
“For smaller organisations adding an extra couple of positions and further reporting can have a significant impact.
“In the vast majority of cases existing laws have been broken and existing regulations breached.
“The answer is not just adding new regulations and laws which may have unintended consequences for smaller competitors to the major banks, where they will be tied up in complying with legislation or regulations that simply aren’t relevant to their operational structure.”
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Mr Mack welcomed the strengthening of regulators APRA and ASIC, saying nothing would change with ineffectual enforcement.
He said the royal commission reflected positively on customer-owned institutions like WAW and Hume Bank but what happened next would depend largely on the outcome of the next federal election.
Mr Mack said major financial institutions had conflicting interests in terms of what’s best for customers and shareholders.
“The fundamental structure of banks have not changed, they are still owned by shareholders and their core mandate is still to generate financial returns for shareholders,” he said.
“There’s been some discussion on the significant impost or increasing cost facing the banks as a result of the royal commission … and whether it could lead to an increase in costs of them doing business and customers could see higher mortgage rates or different fees and charges – but I think it’s unlikely.”
Hume Bank was approached for comment
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