A review of the Australian banking sector focused on the role small and medium sized banks play in providing competition in the sector and the regulatory and market trends affecting them. This report responds to the Terms of Reference for the review by examining:

• the role and state of the small and medium-sized banking sectors in providing competition
• the regulatory and market trends affecting their competitiveness
• current and potential sources of and barriers to competition from these sectors.

The review identified several areas where the regulation of small and medium-sized banks could be streamlined or simplified, without compromising the protection of consumers and broader financial stability.

The report makes nine recommendations for the Australian Government and sets out nine actions for regulators. It is considered that collectively this suite of complementary proposed changes would assist with improving the competitiveness of small and medium-sized banks. The Government accepts in‑principle eight recommendations and welcomes all nine actions from regulators.

The recommendations and actions are grouped as:

• targeted at more proportionate regulation
• to help overcome barriers to entry and to facilitate sustainability and scale
• to increase funding access
• if the Government wants to go further.