Consumers crying out for more competition: MyState

In a statement yesterday, MyState chief executive Melos Sulicich said the federal government needed to do more to increase competition and level the playing field between small and large banks, with small banks remaining hamstrung by competitive inequity.

On the topic of mortgage risk weights, Mr Sulicich said that while regulation had required large banks to increase the average mortgage risk weight to 25 per cent, this was not enough to level the playing field.

“The average mortgage risk weight for smaller banks is 39 per cent … the government needs to raise the minimum average mortgage risk weight for large banks to at least 30 per cent, if not above, to address competitive inequality,” he said.

“At present small banks hold 56 percent more capital, which is a huge disparity.”

“This regulatory capital requirement advantage is compounded by a funding cost advantage from an implicit government guarantee of ‘too big to fail’, which helps large banks obtain wholesale funding at significantly lower cost,” Mr Sulicich added.

“The public are crying out for the competition which is provided by small banks, but we are obliged to issue fewer mortgages using the same capital.

“The really unfair aspect is that the risk of the mortgages issued is the same.

“Banks like MyState want to compete vigorously and give large banks a run for their money. We are up for the competition, but our returns are lower due to the risk weight disadvantage.

“These constraints are stifling consumer choice.”