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Capital constraints have become a major issue for Australia’s mutual lenders. Back in March, the Turnbull government appointed Greg Hammond to facilitate a review of the sector and look at potential reforms to support the mutuals.
Mr Hammond will make recommendations to the government on whether there should be regulatory or legislative changes to improve Commonwealth-registered cooperative and mutual enterprises’ access to capital and whether ‘mutual enterprise’ should be explicitly defined in the Corporations Act 2001.
Speaking to Mortgage Business, Heritage Bank chief executive Peter Lock explained how the potential reforms would benefit the bank.
“It will free up our ability to be better capitalised and the investment profile required to compete,” he said. “With the amount of digital and capital investment banks are now required to keep up with the restriction on capital will be detrimental to the industry in the long term.”
Mr Lock explained how Heritage is on a journey to change its operating model from what he describes as “a physical bank with a digital presence” towards becoming “a digital bank with a physical presence”.
This is a complete change of mindset for the mutual bank, which currently has 61 branches in Queensland and a national network of accredited mortgage brokers. A digital transformation is also a costly undertaking. Mr Lock is hopeful that the Hammond Review will provide some relief.
“A capital instrument that is offered to our members would be a priority for us. We see firstly a legislative change would be the best way of doing that,” he said.
Mr Hammond is expected to report to government by 29 July 2017.
[Related: Heritage Bank appoints COO]
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