A leading academic has called for a review of whether the Australian Prudential Regulatory Authority (APRA) is limiting the growth of the financial services sector.

Professor Rodney Maddock of Monash University says that no such review of APRA has taken place since its formation in 1998.

Maddock, who was formerly a senior executive at the Commonwealth Bank and a chief economist for the Business Council of Australia, said the Financial System Inquiry, led by David Murray, should examine whether APRA was excessively focused on prudential regulation.

“In their terms of reference, APRA are supposed to take account of the stability of the system, but also a whole range of other things,” he said.

“It is not quite clear to me that it has not been excessively prudent at the expense of other policy objectives for Australia.”

Maddock highlighted the prudential rules which make it harder for Australian banks, than foreign banks, to buy assets offshore and the difficulty of new domestic competition emerging.

“Some of the complaints from the smaller banks are that APRA has regulated to make it really safe, but it makes it bloody hard to get in.”

For the superannuation sector he wanted members to sacrifice some of the ease with which members could switch funds, in order that more of their money could be held in less liquid assets. He added that funds could also be given greater freedom on liquidity and capital in order to invest in illiquid assets.

Maddock will preview his thoughts at the Investment Administration Conference, Doltone House, Elizabeth Street, Sydney on Wednesday, February 12. The agenda and registration page can be viewed here.