HomeView 2015 Media ReleasesOpening Statement - Senate Economics Committee Inquiry into cooperative, mutual and member-owned firms

Thank you for the invitation to appear before the Inquiry today.

Thank you for the invitation to appear before the Inquiry today.

COBA is the peak body for customer-owned banking institutions: credit unions, building societies and mutual banks.

More than four million Australians bank with a customer-owned banking institution. Collectively the sector has $94 billion in assets and the largest share of the household deposits market outside the four major banks.

Credit unions, building societies and mutual banks are subject to the same regulatory framework as listed banks and are competing in the same business of retail banking but their reason to exist is entirely different.

Customer-owned banking institutions exist to meet the needs of their customers rather than to maximise returns for a separate group of shareholders.

Our model has a simple and singular focus and, as a result, our sector has:

  • market-leading customer satisfaction ratings;
  • highly-competitive pricing; and
  • a strong community focus.

Customer-owned banking institutions have been solving problems and meeting the needs of Australians for well over a century and our model remains highly relevant today.

Australia has a banking market which is dominated by four very large players that are very good at maximizing returns for their shareholders.

We offer a genuine alternative: banking institutions that can be trusted to put customers first.

COBA members offer the full range of retail banking products and services and provide highly-competitive pricing on key products such as home loans, credit cards, personal loans and deposits.

The average standard variable home loan rate for owner occupiers in our sector is 69 basis points lower than the average advertised standard variable rate offered by the four major banks. That difference equates to a saving of around $160 a month on a 25 year, $400-thousand mortgage.

  • That figure of $160 is based on current rates before the major banks implement the rate rises that they have recently announced.

Our sector’s pricing is determined by the need to run strong, sustainable businesses where we balance the interests of our borrowers and our depositors.  There is no tightrope for us – we come down on the side of the consumer every time.

Our sector provides competitive pricing and a real alternative despite being hobbled by a regulatory regime that benefits the largest banks and doesn’t adequately consider the customer-owned model.

The public policy mindset on these issues is too narrow.  Too often, policy makers consider only two models for the delivery of products and services to consumers – delivery by the Government on the one hand, or by the shareholder-driven private sector on the other.  There are other viable models – the co-operative or customer owned model being one of them. 

But for these models to be truly viable, they have to be considered when regulatory frameworks are developed, not squeezed into regulatory frameworks designed for listed banks or other institutions, often as an after-thought. 

And it is critical that regulators treat the different models of ownership equally.  I understand that this makes their job more difficult than if there was only one type of institution – but that is no excuse.

Diversity of ownership brings more competition to the market.  Co-operatives and customer owned banking institutions make ethical and responsible decisions with a long-term perspective, not decisions based on short term profit maximisation.

And competition brings choice and reduces concentration risk in the banking market – this is better for consumers and better for the stability of the economy.

The latest round of re-pricing of home loans by the dominant players has been sparked by changes to regulatory capital requirements.

However, it’s important to recognise that these changes do not level the playing field – they just narrow the gap between the amount of capital that small and large banking institutions must hold against home loans.

The major banks are still permitted to hold much less capital against the same asset, i.e. a home loan, than their smaller competitors.

This advantage gifted to the major banks by the regulatory framework comes on top of the significant funding-cost advantage that major banks enjoy due to credit rating agencies factoring in an implicit guarantee from the taxpayer.

And of course the major banks have the advantage of their massive scale.

This makes them formidable competitors for small players like COBA members and underlines the need to take steps to promote competition and diversity in the banking market.

We would like to see government, regulators and other stakeholders do more to promote and accommodate the customer-owned model.

The banking regulator, APRA, can do more to accommodate our model in setting the prudential framework.

The consumer-protection regulator, ASIC, can do more to alert consumers that there are genuine alternatives to the major banks.

Government can do more to level the playing field in taxation of customer-owned banking institutions compared to listed banking institutions.

We are asking for this Committee’s support for measures to promote and accommodate our model for the benefit of Australian consumers.

Our submission sets out these matters in more detail and I am happy to respond to any questions you have.


Opening Statement108.2 KB

Mark Degotardi, COBA, CEO

Media contact:

Daniel McDougall, Senior Manager – Media and Communication

02 8035 8444 or 0407 637 541, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Customer Owned Banking Association is the industry body for credit unions, building societies, mutual banks and friendly societies.  See coba3.nexusone.com.au



Media Contacts

Ashley Penny
Corporate Affairs Manager
P: +61 2 8035 8444
M: +61 431 932 950
Email Ashleycontact-arrow

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