Home' Connexus : Issue 45 Contents much different to the size of papers for some of the
nation’s largest banks. It just doesn’t make sense,”
Holiday Coast Credit Union has been engaged in
lengthy discussions with APRA over Tier 1 capital
after previously gaining approval in August 2000
to issue $5 million of irredeemable non-cumulative
preference shares that were called member
investment securities. Then, when it sought to raise
more capital through the securities in 2011, APRA
indicated the move would not meet regulatory
Worse still for Holiday Coast is that, under Basel
III, APR A has required the credit union to amortise
the regulatory capital value of its existing member
investment securities by 10 per cent a year,
starting from 1 January 2013.
Holiday Coast chief executive Neville Parsons
says access to regulatory capital and the applied
capital provisions under Basel III for mutuals --
since they do not have ordinary shares and, indeed,
cannot if they are to maintain mutuality -- continue
to affect the customer-owned sector and should be
on the Murray inquiry’s agenda.
"A key issue here is that our regulators, or
at least the policy setters, do not have a full
appreciation of the discrete structure and the
nature of mutuals, as opposed to a corporation that
has ordinary shares."
Parsons says there must be a way for mutuals
to raise common equity Tier 1 capital and to be
able to issue it without the need to have ordinary
shares, and still meet the requirements for a
mutual under the Corporations Act.
“We have to fnd a solution because the access
to common equity Tier 1 capital is important
for the long-term growth of the mutual fnancial
institutions sector and will be essential for the
sector to be a true alternative to the larger banks.
Hopefully this inquiry will do that."
Challis admits he takes a different view on
prudential regulation to many of his colleagues,
arguing that APR A needs to deliver closer
regulation of the fnancial sector. His chief hope
is that the inquiry leads to any institution that
conducts any type of banking being "roped in"
under the watchdog for protection, including
insurance companies, superannuation providers
and debenture issuers.
"I have this welded-on view that customers are
naïve and not aware of the difference between,
say, a debenture company or a church banking
organisation and an authorised institution."
He says the customer-owned sector is not a true
"It is a soft governance model, and therefore I
support closer regulation."
However, Challis says his regulatory view should
not be confused with his hope that the sector
gets the same treatment in relation to capital risk
weightings. On that front, he agrees that it has
been unfairly disadvantaged.
Growing con dence
In its Mutuals: 2013 sur vey, KPMG indicates
that credit unions, building societies and other
customer-owned institutions are at a crossroads,
with operating profts after tax decreasing
marginally and deposit rates growing 4.2 per cent
during the year.
Russell says that, despite challenges, there
is growing confdence in the sector, which
must not miss the chance to provide specifc
recommendations to the inquiry panel.
"The GFC basically saw consolidation in the
marketplace. If mutuals can state their case about
why customers should come to them, then they
have a good chance of being more successful than
in the past because there are fewer players."
Nevertheless, they must continue to innovate,
"As a small player, you do have the ability to
be faster to market with new products, and to be
more adaptive, because you don’t have some of the
signifcant change-management issues you have in
a larger business."
COBA has strongly argued that, for its members
to prosper, the inquiry must rein in the advantages
creditors extend to the major banks through their
too-big-to-fail status, which has contributed to
their share of home loans soaring past 80 per cent
since the GFC.
COBA wants the inquiry to adopt a principle of
‘competitive neutrality’, allowing customer-owned
banking institutions to be able to compete on
equitable ter ms with their large, listed competitors.
the front foot and
put a very coherent
case on the table.
Peter Evers, Managing
Director, People's Choice Credit Union
Links Archive Issue 44 Issue 46 Navigation Previous Page Next Page