The submission by the Customer Owned Banking Association to the Senate Inquiry into Co-operatives and Mutuals includes a range of requests to better accommodate the customer-owned model, including changes to rules on regulatory capital, tax and disclosure.
This last point has been a source of intensified lobbying by COBA in recent times and the submission, backed by a media release, renews the attack.
"The reality that our market is highly concentrated is masked by a proliferation of sub-brands and a poor disclosure regime," COBA said, adding that its consumer research strongly suggested "major banks are getting away with portraying their sub-brands as independent competitors."
COBA therefore wants a disclosure regime that "allows consumers to easily understand who they are dealing with in the banking, mortgage broking and financial advice markets."
The lobby group also tells government and agencies they should do more to promote the customer-owned model, starting with the introduction of competitive neutrality into the tax and regulatory framework.
Another of COBA's recommendations was for regulators and legislators to "acknowledge the tax disadvantage faced by customer-owned banking institutions and support measures to solve the problem."
COBA argued that a competitively neutral tax system would provide an avenue for customer owned banking institutions to release franking credits, which otherwise "remain locked up, increasing year after year as the company continues to make profits, pay tax and prudently retain those profits as its main source of regulatory capital."
COBA sees two main ways to address the imbalance created by the current franking credit arrangements:
- allowing customer-owned banking institutions to issue frankable debt deposit products; or
- applying company tax on customer-owned banking institutions at a rate that is comparable to the effective tax rate of their listed competitors, which it estimated as being in the 22 to 25 per cent range.
"We note that precedents already exist for differential company tax rates in Australia, with small businesses to have a new rate of 28.5 per cent from 2015-16," the COBA submission pointed out.