Credit unions, building societies to ramp up competition in banking
12 December 2010
Australia's strong customer-owned banking institutions – credit unions and building societies – have welcomed today's announcement as a good step towards more bank competition.
“There are some real positives in today's announcement,” said Louise Petschler, CEO of industry group Abacus – Australian Mutuals. “Credit unions and building societies are the alternative to the big banks and we're being asked to turbo-boost competition – that‟s a challenge we relish.”
An important new measure is a new “Government protected deposit” seal to explain more clearly the safe and secure standing of credit unions and building societies, along with banks.
“This will help improve understanding of the safe and regulated basis of all banking institutions, credit unions, banks and building societies, each of which meet the same strict standards and APRA rules as the big banks,” said Ms Petschler.
“We welcome the continuation of the Financial Claims Scheme which is a further measure to reassure Australians about our safe banking system”.
A “Bank on a better deal” Government campaign will be launched promoting choice and awareness - highlighting great credit union and building society options in retail banking. The package also includes a review of account portability, banning of exit fees and a review of barriers like lenders mortgage insurance and standards for mortgage discharges.
“Mutual banking institutions are about their members, so any measures to help consumers shop around and move between lenders more easily are welcome,” said Ms Petschler. “We will be working closely with Government to make sure these measures are mutual friendly‟ and not built around complex systems or big bank needs.”
Abacus has welcomed the Government's initiatives on funding and sustainability but flagged the need for more work with industry on the vital area of wholesale funding costs.
“To complete the competition picture it is critical that we push access to wholesale funding markets” said Ms Petschler. “The Government's initiatives in this package are a positive start and we will work with the Government on these, but more work is needed.”
“We are at the start of a real change in banking – one that will work for consumers, and bring back competition. And we intend to do our part to accelerate this debate.”
Abacus flagged areas for further work on funding costs for smaller lenders including:
- Taxation incentives for deposits and allowing mutuals to use franking credits, and
- Improving liquidity in the secondary market for RMBS.
“We are confident the Government will continue the consultation process with all players, including credit unions, building societies and banks as well as other lenders.”
“Credit unions and building societies will continue to work to grow their market share. We are committed to providing Australian consumers with a better deal in banking.”
For more information, please contact:
Pamela Eldridge, Senior Adviser – Media
0423 843 790;
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