Supermarket group Coles fears increasing regulation will bar new entrants from expanding in the financial services industry.

“We hold some concerns… that the regulatory framework may incrementally shift to an unintended point where financially sound and otherwise well-regulated new entrants cannot compete in financial services in the future,” it says in a submission to the financial system inquiry.

“These concerns arise mainly from the growing trend internationally for financial regulators to impose more costly and intrusive forms of financial regulation.”

Coles says overseas retailers offer a much wider range of financial services products than Australian chains.

insuranceNEWS.com.au understands Coles has been considering selling life cover following its successful move into motor insurance.

Some insurers have been asked to tender to provide the service, but no further action has been taken.

In Australia, only Woolworths has offered life insurance, via an agreement with Hollard and Swiss Re, whereas British retailers Tesco, Sainsbury and Marks & Spencer all offer life cover.

Coles’ submission does not say why it has held off entering the life market, but it raises reservations about the regulatory framework.

“The issue of regulatory conservatism is particularly important in the Australian context, given the Australian Prudential Regulation Authority’s (APRA) approach to prudential supervision is already among the most conservative in the world.

“Given APRA’s conservative starting point, we believe it is important that the prudential regime in Australia does not become unreasonably onerous.”

Coles has expressed particular concern about APRA’s framework for Level 3 conglomerates.

“This framework imposes requirements for prescribed conglomerates in relation to group governance, risk exposures, risk management and capital adequacy from 2015,” it says.

“These are not unreasonable for financial conglomerates but, if imposed on non-financial conglomerates, would involve material costs that would severely restrict retail groups’ ability to expand their financial services offerings.”