The Council of Financial Regulators in consultation with the ACCC will conduct a review of the small and medium-sized banking sector. The Treasury yesterday released terms and scope for this review.

•    the role and state of the small and medium-sized banking sectors in providing competition

•    the regulatory and market trends affecting their competitiveness, and

•    current and potential sources of and barriers to competition from these sectors.

The review “seeks to include the CFR and ACCC’s views on how competition and dynamism in these sectors can be better supported. As well as what steps may be taken to improve regulation to ensure increased proportionality and an appropriate balance between competition, innovation and stability.”

The review will include (but not be limited to) an examination of:

•    how mechanisms to mitigate deposit risks and contagion risks (such as the Financial Claims Scheme) may enable more proportionate ex-ante regulation for smaller banks and lower barriers to entry and expansion

•    access and costs of funding by small and medium-sized banks, including the impact of current statutory limits on the use of covered bonds, and

•    the cumulative regulatory reporting obligations from across the CFR agencies for small and medium-sized banks.

The CFR is to provide a final report to the government by 1 July 2025.