BRENDAN TREMBATH: Australia's about to get a new bank if its members
agree. The Sydney-based Teachers Credit Union is Australia's third
largest credit union. It says the move will allow it to access funding
more cheaply, helping it compete against the major banks.
But
other lenders say, whatever credit unions call themselves, they will
never be able to challenge the dominance of the big four.
Business reporter Michael Janda has more.
MICHAEL JANDA: What's in a name? Well, quite a lot according to Teacher's Credit Union chief executive Steve James.
STEVE
JAMES: Some organisations out there, some councils and some
semi-government authorities have in their charters that they'll only
deposit with banks. It allows, by having bank in our name to be able to
access some of these funds.
MICHAEL JANDA: New South Wales-based
Teachers will change from a credit union to a mutual bank, if 75 per
cent of its members who vote say yes.
It would be the third, and
largest, credit union to make the switch, after the Federal Government
changed rules to allow for mutual banks that are owned by their
customers. The previous two were also education-related credit unions,
based in Victoria and Queensland.
Steve James says there'll be no change for Teachers Credit Union customers, other than hopefully better interest rates.
STEVE
JAMES: We intend to always remain a mutual, one share one vote, with
our members. There is no demutualisation in this, this is just purely a
name change as we go forward and we recommend that our members vote for
it.
MICHAEL JANDA: Louise Petschler is the chief executive of
Abacus, which represents credit unions, building societies and mutuals.
She says many of her members are thinking about making the change.
LOUISE
PETSCHLER: What we're hoping this will do is help us better explain
that in Australia every credit union, every building society, every
bank, is regulated in exactly the same way and covered by the same
guarantees and protections.
What we find though when we do
market research and focus groups is that a large number of people who
don't already bank with mutuals assume that the banks have some special
protection and that we're not covered by that.
MICHAEL JANDA: But
Aussie Home Loans executive chairman John Symond, who's company is
partly owned by the Commonwealth Bank, says he can't see mutuals ever
seriously challenging the dominance of the major banks.
JOHN
SYMOND: They can change their name from a credit union to a bank to give
the consumer the perception "oh it's a bank, it's safe". But when
things get rough, consumers pull their money out of even the small banks
and they go to the safety of the big four banks.
Now governments
dropping the guarantee on deposits from $1 million to $250,000, come
the 1st of January and you will see an outflow of deposits over $250,000
all going back to the four major banks.
MICHAEL JANDA: Although
in some ways isn't the focus on retail lending from mutuals and other
smaller institutions actually safer than lending to some of those big
corporate which have been responsible for some of the biggest bank
losses in Australia's history?
JOHN SYMOND: Oh absolutely and
that's why today our big banks have got an appetite for lending only for
the safety of mum and dad home loans. They aren't interested in
big-ticket loans. But to become a true fifth pillar, you've got to
provide all those facilities.
But there's always a place for the
small corner store and that's where credit unions, building societies
and the small mutuals, that's the role that they have to play and we're
kidding ourselves if we think that they can in any way pose any sort of
threat to those big ugly four banks.
MICHAEL JANDA:
Unsurprisingly, Louise Petschler is more optimistic about the level of
competition the mutual banking sector can provide. She says a lot of
large credit unions are getting stronger through organic growth and
mergers.
LOUISE PETSCHLER: I think we'll definitely continue to
see mergers amongst credit unions. That's a very common feature of a
mature credit union system as we become larger we're looking at ways to
work together to reduce costs.
We've actually got the strongest
credit union system in the world here in Australia. We've got 20 per
cent of the population who do their banking with us, we've got about 10
per cent market share in terms of mortgages. What we'd love to see is
that increased to 20 per cent, match what our population penetration is
and put a bit of heat on the practices of the big banks.
MICHAEL
JANDA: And Steve James says he'd like to see the various teachers mutual
banks and credit unions around the country join forces to take on the
big four.
STEVE JAMES: We'd love to see that one day, certainly
at the moment we're focused on becoming Teachers Mutual Bank but if
there's opportunities in the future, later in 2012 or 2013, we'd
certainly participate in talks.
MICHAEL JANDA: Teachers' 155,000 members will get their say on the name change at the AGM on November 26.
BRENDAN TREMBATH: Michael Janda reporting.
The full story...
Teachers Credit Union to become a bank
Michael Janda reported this story on Friday, October 14, 2011 18:46:00
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