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COBA welcomes draft legislation creating mutual capital instrument

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Release today of a draft bill by Assistant Minister for Treasury and Finance Zed Seselja to create a new capital instrument in the Corporations Act is a positive step forward for customer owned institutions and consumer choice.

“We welcome the Government’s draft bill which will increase the flexibility of the customer owned banking sector to raise capital,” said COBA CEO Michael Lawrence.

“This draft legislation will allow customer owned institutions to issue a Mutual Capital Instrument (MCI) to raise the capital to grow without risking demutualisation.

“The Government’s broad suite of mutual capital reforms are a welcome endorsement of the customer owned model and recognises the importance of a strong customer owned sector for consumer choice.

“We are grateful for the Government’s ongoing support of the customer owned model, which enjoys strong bipartisan support, particularly championed by the bipartisan Parliamentary Friends of Cooperatives and Mutuals Group co-chaired by Nationals Deputy Leader Bridget McKenzie and Shadow Assistant Treasurer Andrew Leigh,” Mr Lawrence said.

Today’s announcement is the final step from the 2016 Senate Mutuals Inquiry, the March 2017 Hammond Report on reforms for mutuals and the Government’s 8 November 2017 policy announcement Backing co-ops, mutuals and customer owned banks to increase competition.

This legislation further progresses the Hammond Report’s recommendations and follows COBA’s work to reform the mutual ADI capital framework (Recommendation 1) achieved through APRA’s 30 November 2017 announcement Changes to the capital framework for mutual ADIs.

"COBA has been advocating for capital for customer owned institutions to allow them to grow and create a stronger alternative to the major banks, together with BCCM.

Rob Goudswaard, CEO of CUA, Australia’s largest customer owned banking institution said:

“The Financial Services Royal Commission has highlighted that Australians need strong, trusted alternatives in banking and financial services. CUA is striving to be a credible alternative, focused on delivering the personalised human experiences that members want, with the convenience of digital channels.”

Peter Lock, CEO of Heritage Bank, Australia’s largest customer owned bank said:

“Heritage Bank strongly supports the changes proposed by the Hammond Review, which represent an important step forward in enabling the mutual sector to become a truly competitive fifth pillar in the Australian banking sector.”

“We will now consult with our members and other stakeholders on the draft bill and we look forward to seeing the legislation finalised and introduced into Parliament as soon as possible,” Mr Lawrence said.

“We look forward to working with APRA, Treasury and our members to ensure that the MCI has the flexibility to qualify as the highest form of regulatory capital.

“COBA also looks forward to the upcoming introduction into Parliament of the first set of Corporations Act amendments which define a mutual entity and lay the platform for these MCI reforms.”

For more information please contact:

Sally Mackenzie
Director – Strategy & Stakeholders
02 8035 8450 or 0412 721 663
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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