Banks defend vertical integration
Australia’s major banks have rejected the notion of enforced structural separation as a means of dealing with conflicts of interest arising out of vertical integration.
The Australian Banking Association (ABA) has used a submission to the Senate Economics Legislation Committee to both reject a push for enforced structural separation and to defend the virtues of “bank integration”.
What is more, the ABA submission has pointed to recent moves by the major banks in the wealth management area as proof of their willingness to unilaterally simplify and demerge their businesses.
“Bank integration can enhance competition and provide economies of scale that reduce the prices of products and services offered to customers,” the ABA submission said. “Integration allows customers the choice of having a single relationship with their financial institution and this can be tailored to meet the needs of that individual, leading to more innovative products and services.”
“While some customers choose to have relationships with different institutions, others prefer to deal with one institution. The market should be able to offer this choice and shouldn’t be hindered by such radical regulatory intervention, which is at odds with the findings of the Royal Commission, the Financial System Inquiry (FSI) and the Productivity Commission (PC).”
“ABA members have different strategies in relation to the range of services they offer and the extent of vertical integration in their business. Some members are taking steps to simplify their businesses and sell or demerge some of their vertically integrated structures. Banks should retain the flexibility to determine these strategies in the future.”
The Senate Economics Legislation Committee has been taking submissions responding to the Banking System Reform (Separation of Banks) Bill 2019 which is being pursued by the Pauline Hanson One Nation Party.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
