Growing from Strength to Strength
Written by Aija Zablovska
In these times of financial uncertainty, we want to assure you that we and our fellow Credit Unions are going from strength to strength. Customer Owned Banking Association , the industry body for all Australian credit unions and mutual building societies recently released the following information.
Healthy, Strong Balance Sheets
- All credit unions and building societies (and banks) are Authorised Deposit-taking Institutions (ADIs), regulated under the Banking Act.
- Credit unions and building societies are well capitalised with robust capital adequacy ratios of 15.8% and 13.2% respectively (compared to around 10% for banks). In dollar terms, that’s a capital cushion of over $5.5 billion.
- Credit unions and building societies are prudent and responsible lenders. Credit union and building societies’ provisions for bad debts at the end of the June 2008 quarter stood at only 0.5% and 0.2% of total loans outstanding. These are the lowest in the ADI market.
- Collective assets of over $60 billion and 4.5 million members demonstrate the scale and strength credit unions and building societies.
- Because mutuals are owned by their customers, they are not under the same pressure as listed entities to take risks to maximise returns to shareholders.
Conservatively managed and operated
- Credit unions and mutual building societies do not engage in sub prime lending and do not invest in securities based on sub prime loans.
- Mortgages at credit unions and building societies continued to grow at a double-digit pace in the year to June 2008, despite the financial turmoil that has forced other lenders to scale back or cease lending.
- With the securitisation market clampdown, non deposit-taking lenders have been hit by a loss of funding. But more than three-quarters of credit unions have less than 10% of their mortgages securitised and half of those have no securitised loans at all.
- Credit unions and mutual building societies fund 80% of their lending from retail deposits.
A trusted haven for Australian savings.
- Household deposits at credit unions and building societies exceed $50 billion and are growing at close to 10% annually. The household deposit base of Australia's mutual ADIs is second only to the CBA.
- As financial market turbulence continues, consumers are looking for a safe haven for their savings. According to the latest Melbourne Institute research, more consumers believe that an ADI deposit is a wise place to place their money.
- Credit unions and mutual building societies typically offer higher savings, term deposit and online savings rates than banks.
Strict regulation protects ADI deposits.
- Credit unions and building societies are subject to the same strict, legally-enforceable prudential standards as every Australian bank, overseen by the Australian Prudential Regulation Authority (APRA).
- APRA’s supervisory role distinguishes credit unions, building societies and banks from other institutions seeking funds in the market - explaining why ADIs do not have to issue a prospectus for their deposits or obtain a credit rating.
- In addition to APRA supervision, many credit unions participate in a self-regulatory financial support system. The objective of this is to protect the interests of credit union depositors and to promote financial sector stability.
- Learn more about Customer Owned Banking Association, the industry body for all Australian credit unions and mutual building societies