Mutual banking sector strong and prudent
25 March 2010
The Reserve Bank’s Financial Stability Review out today provides further confirmation that credit unions and building societies have the competitive potential to become the missing ‘fifth pillar’ in retail banking.
“The RBA’s Review shows that credit unions and building societies are more strongly capitalised than banks, have much lower non-performing loan ratios than banks, and have increased their share of the home lending market,” said Abacus – Australian Mutuals CEO Louise Petschler.
“As wholesale lenders and smaller Australian banks have lost market share to the big four banks in home lending, the mutual banking sector has been able to hold its own and make some modest gains,” Petschler said.
“Credit unions’ and building societies’ share of new mortgages was 8.6 per cent in January 2010 - more than the 8.3 per cent share they held in December 2007 before the global financial crisis.
“With $48 billion in home loans, credit unions and building societies provide important competition against the major banks.
“The capacity of credit unions and building societies to apply even greater competitive pressure on the major banks would be enhanced by an effective public awareness campaign about the prudential standing of all regulated banking institutions. Big banks unfairly benefit from consumer misconceptions that they are safer than other regulated banking institutions.
“The evidence from the RBA’s Financial Stability Review shows just how wrong these misconceptions are. Credit unions and building societies are ‘well capitalised, with aggregate total capital ratios of about 16 per cent’ compared to the banks’ ratio of 12 per cent. Credit unions’ and building societies’ non-performing loans ratios are 0.15 per cent and 0.28 per cent compared to the banks’ ratio of 0.63 per cent.
“We want the Government and the regulators to do a better job in getting the message out to consumers about the strong prudential standing of all regulated banking institutions, to respond to concerns about reduced competition in banking.
“A public awareness campaign about the prudential regulatory framework, as recommended in our 2010-11 Budget submission, is a sound and measured response that can be implemented now,” Petschler said.
For more information, please contact:
Louise Petschler
Chief Executive Officer
0408 239 226, 02 8299 9036,
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Mark Degotardi
Head of Public Affairs
0419 998 201, 02 8299 9053,
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