Credit unions, building societies call for action on bank competition
22 October 2010
Australia's customer-owned banking sector – credit unions and mutual building societies – has called on policy makers and politicians to take practical steps to increase competition against the big banks.
"This debate should not be about punitive rules or new government-owned banks," said Louise Petschler, CEO of industry group Abacus. "There are simple, important measures that government can take to build on the strong bank competitors already here: credit unions and building societies."
"Credit unions and building societies are already the 'People's Bank', serving over four and half million Australians. After the big 4 banks, we're the largest holder of household deposits, offer a full range of services at consistently better rates than the banks and the highest satisfaction in the market."
"We have more branches than the CBA, one of the largest ATM networks in the nation, and more than three times the customer base of other big bank competitors like Bendigo/Adelaide Bank."
"There's no doubt that the current environment suits the big banks. The challenge for policy makers isn't building another government bank – it's taking steps to even up the playing field."
Options to improve the awareness and reach of alternatives to the dominant "Big 4" banks include:
- Taking the mystery out of prudential safety -
Too many Australians stay with big banks because they mistakenly think they are safer. In fact, CUBS meet all the same rules as banks, the same coverage under the deposit guarantee, and hold more capital and liquidity than big banks. Regulation needs to change – such as replacing the clumsy term "ADI" to "Authorised Banking Institution". The Government should explain how our strong prudential system protects depositors with all banks, credit unions and building societies. Until the system is better understood, Abacus is calling for the retail deposit guarantee to be maintained at $1 million to level the playing field. - Funding options to support lending growth -
CUBS will always be majority retail deposit funded, reflecting our conservative operations – but more accessible wholesale funding is needed to support stronger lending growth. The time is right for the Government to consider more direct action – such as funding for targeted areas, a scheme such as the Canadian Mortgage Bond Program and expanding the brief of the AOFM to better suit smaller ADIs. - Targeting areas of high need -
Small business and regional communities are calling out for better banking services. The Government should consider the merits of specific purpose funding pools – use of which would be subject to clear criteria – that would help keep local communities strong and local capital invested in the community. - Making sure the regulatory systems help, not hinder, competition -
Australia has the third-largest and the most successful credit union system in the world, but the only one where the role of mutuals and their low-risk profile isn't recognised in regulation. While we strongly support Australia's prudential system we encourage a review of regulation to make sure the great customer-owned banking system we have is able to compete fairly with big banks.
"Meanwhile, we encourage consumers who are unhappy with big banks to make the switch to the friendly mutual sector. It's not as hard as you think and we will help you. Credit unions and building societies have set up a link – www.comesbacktoyou.com.au – with more detail," said Ms Petschler.
For more information, please contact:
Pamela Eldridge
Senior Adviser - Media, Public Affairs
(02) 8299 9024, 0423 843 790
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