The government will cut some of the red tape entangling smaller lenders in a move it hopes will boost competition in the banking sector, including removing the need to automatically report certain legal breaches to the corporate regulator and simplifying compliance reporting.

A review by the Treasury and the country’s financial regulators, which Treasurer Jim Chalmers commissioned last year to identify ways to help small banks compete, wants policymakers to “give due consideration” to how changes to rules affect smaller players.