Credit unions & building societies: a sure footing
26 March 2009
The RBA’s latest Financial Stability Review shows that building societies and credit unions are more strongly capitalised than banks and have lower non-performing loan ratios than banks.
The credit union sector has an aggregate capital ratio of 16.25 per cent and the building society sector’s ratio is 14.5 per cent, compared to the banks’ ratio of 11.4 per cent.
Non-performing housing loans for banks are 0.48 per cent, while the figure for building societies is 0.3 and for credit unions it is closer to 0.1.
“These are very strong fundamentals and they set us up well to manage challenging times,” said Louise Petschler, CEO of Abacus – Australian Mutuals.
“The RBA’s Financial Stability Review shows how the major banks have increased their market share of new owner-occupier home loans to 82 per cent, a 20 per cent point increase from mid 2007, as wholesale lenders have exited the market.
“The majors have been gaining market share and swallowing up regional banks.
“Building societies and credit unions have become even more important to maintaining a competitive retail banking market.
“I see that a major bank CEO is saying that there are issues where many people think the banks can be bastards. To those people, the choice is clear. Make the switch to member-focused banking and join their local credit union or building society,” Petschler said.
In a recent submission to the Senate Inquiry into bank mergers, Abacus makes the following recommendations to promote the capacity of building societies and credit unions to continue to provide effective competition and choice:
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Promote public understanding of the prudential regulatory framework and the status of mutual Authorised Deposit-taking Institutions (ADIs);
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Amend anti-competitive aspects of the Government’s optional guarantee for high value deposits
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Policy-maker engagement with mutual ADI sector aggregators to improve access to wholesale funding; and weigh up new regulatory proposals against the need to reduce the regulatory compliance burden on mutual ADIs.
For more information, contact:
Louise Petschler, CEO
02 8299 9036, 0408 239 226
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Pamela Eldridge, Media Adviser
02 8299 9024, 0423 843 790
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