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The Customer Owned Banking Association (COBA) has welcomed the release for public consultation of draft amendments to APRA’s prudential standards on capital to accommodate the customer-owned model.
The draft amendments will restore the ability of the customer-owned banking sector to continue to raise alternative forms of capital to retained earnings - an ability that was lost when the Basel III capital standards came into effect on 1 January this year.
COBA’s head of public affairs, Mark Degotardi, said the draft amendments are a welcome step towards recognising the customer-owned business model in the prudential regulatory framework for banking.
“Customer-owned banking institutions - credit unions, building societies and mutual banks - provide critical competition and choice in Australia’s retail banking market. The regulatory framework must be tailored to reflect our model,” he said.
“Australia’s customer-owned banking sector is one of the strongest in the world – with 4.5 million customers and total assets of $85 billion. The sector here in Australia is also one of very few in the world that complies with the Basel global banking standards.
“The Basel III capital standards are designed for internationally-active listed banks, and implementation of the standards in Australia in January 2013 actually reduced the range of capital options for customer-owned banking institutions,” he said.
Mr Degotardi said COBA has been in discussion with the Australian Prudential Regulation Authority (APRA) for some time about giving customer-owned banking institutions the flexibility to raise capital within the Basel III rules and also within the Australian Securities and Investments Commission's (ASIC’s) regulatory guide on mutuality.
“COBA members are strongly committed to retaining their highly successful, customer-focused model but they also need additional capacity to raise capital when needed to grow and take strategic opportunities.
“Our sector is very strongly capitalised and will always rely on retained earnings as its primary source of regulatory capital. This change simply provides additional flexibility for capital management.
“COBA will make a submission to APRA on the detailed proposal and we look forward to APRA’s implementation of the amendments as soon as practicable,” said Mr Degotardi.
