Better than a "people's bank": Australia's credit unions & building societies
08 July 2009
Australia’s credit union and mutual building society peak body, Abacus – Australian Mutuals, has responded to a letter by economists on the concept of a new “people’s bank”, saying that mutual banking institutions already fill this role.
“Credit unions and mutual building societies exist for their members: being mutual organisations, their members own them,” said Louise Petschler, CEO of Abacus.
“Instead of maximizing external shareholder returns, credit unions and mutual building societies put their profits back into better rates, fairer fees, responsible lending and outstanding customer service. Instead of arguing for a ‘people’s bank’, economists should recognise the strong competitive alternative to the big four banks: credit unions and building societies.”
Credit unions and mutual building societies are strong, resilient and serve close to 4.6 million people across Australia. Being Authorised Deposit-taking Institutions (ADIs), they are regulated to the same strict high standards as banks, under the Banking Act and oversight by the Australian Prudential Regulation Authority (APRA).
Credit unions and building societies have outstanding results in customer satisfaction surveys, consistently out-performing the major banks by more than 10 percent. Our loan rates and deposit rates consistently outperform the banks, according to recent research by independent firm InfoChoice [1] (with average home loans 0.5% lower with credit unions).
A recent KPMG report [2] issued in July noted that the sector is performing very well, despite global financial conditions. The KPMG report confirms that credit unions and building societies have exceptionally strong balance sheets. Deposits, assets, capital and liquidity have all grown in 2009 and our impaired asset levels have remained at historically low levels.
Whilst fundamentals are strong for the mutual ADI sector, KPMG noted that the retention of the retail deposit guarantee is important to support competition, and the differential pricing of the government guarantee on wholesale funding is hurting competition.
“Credit unions and building societies support the retail deposit guarantee, and its role in promoting stability. However, the pricing on the wholesale funding guarantee disadvantages smaller institutions. It’s time for the Government to consider improvements to the scheme pricing and to provide better access to wholesale funds to support competition in retail banking,” said Ms Petschler.
Australians already have a real choice in banking outside the “Big 4” - there is a genuine, strong and healthy banking alternative for consumers that is serving close to 4.6 million Australians and their banking needs: Australian credit unions and building societies.
For more information:
Mark Degotardi
Head of Public Affairs
02 8299 9053, 0419 998 201
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Pamela Eldridge
Media Adviser – Public Affairs
02 8299 9024, 0423 843 790
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[1] “Big 4 Home Loan Customers Pay $2.7bn more”, InfoChoice media release 16 June 2009
[2] “Regional banks, credit unions and building societies 2009 – UPDATE”. KPMG, 2 July 2009
