The Customer Owned Banking Association yesterday released its second submission to the Financial System Inquiry,  repeating its call for further competition in the Australian banking sector. COBA  targeted what it described as the unfair funding cost advantages of systemically-important major banks, and the risks they posed.This contrasts with the view from the RBA that the supply of mortgage finance in Australia is ample. Therefore, the RBA's argument goes,  any proposed policies that could further increase the supply of home loans should be subject to rigorous analysis of their costs, benefits to consumers and risks to financial stabilityCOBA's submission included independent analysis by the consultants Macroeconomics on the "subsidy" provided at no cost by taxpayers to the four major "Too Big To Fail" banks. This subsidy is estimated to have a current annual value of between A$2.9 billion and $4.5 billion.It added that the FSI interim report's finding that the banking sector is "competitive, albeit concentrated" was a recipe for complacency.COBA's submission is available at www.customerownedbanking.asn.auSimilarly, the submission on behalf of four Australian-owned regional banks (Bendigo and Adelaide Bank, BOQ, ME Bank and Suncorp Bank) highlighted five specific issues they said should be addressed to foster "a healthy, multi-tiered banking system", which in turn, would benefit customers by enabling fairer competition between major banks and the rest of the banking sector.The regional banks called for: A "more risk-reflective system" of setting regulatory capital for housing loan assets through the simple extension of the current 'standardised' system risk weight tiers to include one additional 20 per cent tier for lower risk loans. This relatively small change to the current approach would deliver material benefits in terms of competition without additional risk. Establishing a more efficient and staged process to assist regional banks accreditation under the 'advanced' capital framework, particularly in relation to housing. Addressing the funding cost advantage for banks deemed 'too big to fail' (TBTF). Improving the disclosure arrangement for mortgage brokers to ensure customers are fully aware of a broker's ownership structure and potential conflicts of interest.  Lowering information asymmetries through an improved system of collecting important financial data relating to credit histories of bank customers (known as Comprehensive Credit Reporting).While an observation in the Interim Report was that the banking system is 'competitive, albeit concentrated', the regional banks said this statement "does not give enough consideration to the likely future state of competition given the current inequalities that exist in the market".The banks also called for final recommendations that gave clear guidance on priority issues and the timeframes for their introduction to "reduce the risk of recommendations being undermined through a protracted implementation process".The regional bank submission can be found here.