COBA welcomes progress of banking reform bill

The Customer-Owned Banking Association (COBA) has welcomed support from the Coalition government’s party room for the Treasury Laws Amendment (Mutual Entities) Bill, which is set to be introduced into federal parliament.

The draft exposure bill includes two key reforms, which include amending the Corporations Act to define a mutual entity and to reform demutualisation rules.

The bill is designed to improve the competitiveness of credit unions, building societies and mutual banks, by increasing the customer-owned banking sector’s ability to raise capital.

Despite welcoming the government’s party-room support for the bill, CEO of COBA Mike Lawrence urged the coalition to “maintain momentum” by introducing the bill to parliament as soon as possible to allow the mutual banking sector to “take on” the major banks.

“Party-room approval is a good first step, but there is no time to waste in getting the bill introduced into parliament,” Mr Lawrence said.

“This bill begins to level the playing field for customer-owned banks to take on the big four.”

Mr Lawrence recently highlighted the opportunity for smaller lenders to capitalise on the growing distrust in the major banks off the back of the financial services royal commission.

Pointing to the Australian Prudential Regulation Authority’s latest quarterly banking statistics, Mr Lawrence said that customers are increasingly looking for alternative banking institutions they can trust.

APRA reported that growth in housing loan approvals among smaller lenders increased by 0.8 of a percentage point quarter-on-quarter and 4.1 per cent year-on-year, compared to 0.6 of a percentage points quarterly increase and a 3.6 per cent rise year-on-year among major lenders.

“Given the damage to the reputation of the broader banking sector due to misconduct exposed by the financial services royal commission, customers are looking for banking institutions they can trust,” Mr Lawrence said.

“APRA’s latest numbers show that customer-owned banking institutions outpaced the major banks and the broader banking sector in growth in housing loans and deposits on both an annual and quarterly basis.

“This shows that customers want an alternative that puts them first.”

[Related: COBA welcomes ‘historic reform’]