APRA Chair Dr John Laker spoke this week on What makes a strong mutual? to an audience of credit unions and mutual building societies. The speech is interesting as much for what it did not say as for what it did say.

What didn’t it say? Apart from a few words at the beginning (see below) it did not clearly identify (particularly in the mind of a regulator) what makes a mutual different. He said:

"‘What Makes a Strong Mutual?’ The simple answer is that a strong mutual would look like any other strong authorised deposit-taking institution (ADI). That must be right. However, the question demands a fuller response, one that takes into account the community links and competitive position of mutuals and their main distinguishing feature — the coherence of interests between owners and customers because they are one and the same".

He concluded by saying:

"Looking ahead, the challenges for mutual ADIs are to preserve their relevance in Australia’s highly competitive financial system and to leverage off their brand and market differentiation, whilst managing the pressures to compete on price and services."

In between there was little about the distinguishing features of mutuals.

ABACUS has sought to value the benefit of being a member of a mutual credit union or building society:

"The member valuation analysis (by Cannex) from June 2005 to June
2006 measured deposit rates and lending rates, as well as all fees
associated with deposits and loans during the year. On average across
1.25m accounts Cannex found that each member derived an average of
$112.53 in benefits. This is in addition to the average $77 p.a.
increase in retained earnings per member ultimately returned in the
form of better products and services."