The Australian Prudential Regulatory Authority has told the Senate banking competition inquiry that the coming Basel III rules will hit the four major banks harder than their smaller competitors.Defending the existing prudential rules for banks and non-banks, APRA said the major banks were helped by some capital requirements but hindered by others. The result was that prudential rules were not "a material factor in the competitive balance" between different types of authorised deposit-taking institutions.And it said preliminary studies suggest that the new Basel III reforms "though not material in their impact on the ADI sector overall, will have more of an impact on the capital and liquidity arrangements of the larger ADIs than on the smaller ADIs". The large ADIs use more structured capital instruments, which Basel III will not allow to be counted as regulatory capital, and they will be hit harder by the tighter definition of capital deductions."APRA's prudential framework does allow for new banking competitors," the submission says. "Over the past decade, a small number of competitors have joined the ADI sector, mainly subsidiaries or branches of foreign banks."