Integrity costs wider industry

Any requirement that all ADIs, regardless of size, must appoint a "principal integrity officer" with independent status within the entity and a direct reporting line to the board is seen as "completely unnecessary and disproportionate" by many of Australia's mutual banks, research for an industry association has found.

This was one component of a broader plea by mutual banks for the presumed avalanche of yet more and more intrusive regulation to be targeted at the major banks (the principal interest of the financial services royal commission).

Kenneth Hayne's public hearings resume this morning in Sydney at the family law court complex.

"There is growing concern about the disproportionate cost of regulatory compliance as decision-makers try to rebuild public trust in response to the Hayne Royal Commission", the Customer Owned Banking Association said over the weekend.

A report for COBA by advisory firm Grant Thornton found that smaller banking institutions already shoulder a larger share of the regulation and compliance burden compared to both their asset and actual size.

"Responsible lending requirements were ranked as the most burdensome area of compliance," Mike Lawrence, chief executive of COBA, said.

"The result could be that mutuals simply have to turn away many more customers who then end up in the arms of less regulated lenders, such as shadow banks," he said.

Grant Thornton interviewed executives from 26 banks and mutuals with asset sizes ranging from more than A$5 billion to less than $1 billion.