Banks' funding role in flux: study

Study finds regulations, super growth changing funding landscape.

The ability of Australia's banking sector to continue to play its traditional role as a lead funder of mortgages, businesses and infrastructure is being cast in doubt due to tighter regulation, the continued growth of superannuation and technological changes, according to a study by the Australian Centre for Financial Studies.

In particular, the study, Funding Australia's Future to be released Wednesday, found that the range of factors will weigh on the financial sector's profitability and limit its access to funds, The Australian Financial Review reported (see John Abernethy's Bank stocks a hold strategy).

The study said that the superannuation sector, capital markets and securitisation will be relied upon to fill the funding cap, especially as savings continue to shift away from bank deposits and towards compulsory super.

“The competitive advantage of banks in originating loans and securities may be threatened,” University of Melbourne professor Kevin Davis said in one of three papers published as part of the study, according to the AFR.

Echoing concerns raised by National Australia Bank (NAB) chief executive Cameron Clyne last year, Monash University professor Rodney Maddock reportedly said, “we believe that banks will actually do constrained in their ability to raise sufficient funds to satisfy domestic needs themselves”.