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December 9, 2013

Mutual Banking Code of Practice Annual Report

The Code Compliance Committee has released its Annual Report for 2012-2013 on the Mutual Banking Code of Practice.

The Report contains useful charts and tables which analyse complaints by service/product and the issues involved.

The breaches are mainly related to:

  • Service
  • Transactions
  • Privacy and confidentiality
  • Advertising
  • Closure of accounts
  • Communication
  • Training
  • Dispute resolution.

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Posted 9th December 2013 by David Jacobson in Mutuals

December 4, 2013

Changes to Mutual Banking Code of Practice

The Customer Owned Banking Association (COBA) has announced its agreement to sixteen recommendations in the Report by its independent consultant in its review of the Mutual Banking Code of Practice (MBCOP).

In addition, the MBCOP will be renamed “The Customer Owned Banking Code of Practice.”

The changes to the Code to take into account regulatory changes in the last 3 years. The changes include:

  • Responsible lending
  • Credit limit increase offers
  • Reverse mortgage loans
  • Third party service providers
  • Stopping of direct debits
  • Members with special needs
  • Governance arrangements

The new Code is scheduled to take effect from 1 January 2014.

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Posted 4th December 2013 by David Jacobson in Legal, Mutuals

October 30, 2013

Mutuals: the prudential regulator’s view

One of the themes of Mutuals 2013 has been regulatory risks.

So the views of the APRA chair John Laker in his final speech to mutuals in that position were worth hearing.

Some of the points he made in his formal speech and the subsequent panel discussion were:

  • In denying APRA has an agenda to exit small ADIs he said: "We want...a vibrant and healthy mutual ADI sector made up of well-capitalised and well-managed mutuals that can "punch their weight" in a tough competitive environment. A sector that also provides room for smaller ADIs that have found their competitive niche. At the same time we do not shirk from difficult conversations with a Board of an ADI whose strategy and performance have left the ADI in the position where its members' best interests would be served through its orderly exit from the industry."
  • In rejecting the proposition that it is APRA's role to create a level playing field for mutual ADIs he said "there is only one class of ADI and all are treated equally. There are no first class and second class ADIs. But the prudential system is not designed to create a level playing field."

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Posted 30th October 2013 by David Jacobson in Legal, Mutuals

October 21, 2013

A new form of capital: mutual equity interests

APRA has published draft amendments to APS 111 which allow for the issue of mutual equity interests by a mutually owned ADI.

APRA is proposing to allow mutual ADIs to issue Additional Tier 1 or Tier 2 capital instruments that could convert to Common Equity Tier 1 capital if the non-viability provisions are triggered.

Unlike listed public companies, conversion into ordinary shares is not possible for mutuals.

The conditions for the instrument will include the requirement for mutual equity interests to provide no voting rights (other than as required under the Corporations Act) and to limit both the claim of mutual equity interest holders on any surplus of a failed mutual ADI and the amounts that can be paid by way of dividends to these holders.

The proposal is open for consultation until 15 November 2013.

Langes will be working with clients to see how they can take advantage of the changes.

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Posted 21st October 2013 by David Jacobson in Credit unions, Legal, Mutuals

See you at the mutuals convention

This year's mutuals convention is in Melbourne next week.

Shannon Adams, David Jacobson and Joshua Annese from Langes will be there.

Please say hello.

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Posted 21st October 2013 by David Jacobson in Mutuals

August 27, 2013

APRA Annual Regulatory Plan for Mutual ADI’s

APRA's Annual Regulatory Plan for 2013-2014 provides a summary of APRA’s planned activities for regulatory changes in the current financial year as well as a summary of APRA’s finalised regulatory changes in the past financial year.

While the core capital reforms have been completed there are outstanding issues relating to amendments to facilitate the issue of non-common equity capital instruments by ADIs with a mutual corporate structure.

APRA proposes that the amendments to facilitate the issue of non-common equity capital instruments by ADIs with a mutual corporate structure will be effective in 2014.

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Posted 27th August 2013 by David Jacobson in Mutuals

June 17, 2013

Review of demutualisation approval procedure rules

ASIC has released Consultation Paper 210 Demutualisation approval procedure rules: Minimum member participation requirement (CP 210) seeking feedback on its approach to considering requests from credit unions to revoke demutualisation approval procedure rules.

Demutualisation approval procedure rules giving ASIC the power of revocation are contained in some credit unions’ constitutions and apply when the credit union is seeking member approval of certain types of transactions that will affect the mutuality of the credit union. However in certain circumstances the rules have proved over-restrictive.

The rules apply in addition to RG 147 requirements and the demutualisation disclosure procedures set out in Part 5 of Schedule 4 of the Corporations Act.

ASIC is considering whether a requirement for 25% of all members of a credit union to vote in a preliminary postal ballot on specified proposals is set at an appropriate level.

ASIC is also considering whether there are any circumstances in which it would be appropriate for ASIC to consider removing or changing the required percentage.

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Posted 17th June 2013 by David Jacobson in Credit unions, Mutuals

May 21, 2013

Comparing capital requirements

I recently attended a talk by BOQ CEO Stuart Grimshaw. He argued that regional banks were at a structural disadvantage against the 4 largest banks.

He pointed to the 4 banks' annual combined profit of more than $24billion; yet smaller ADI's had to provide up to 3 times as much capital for housing loans.

Whilst he acknowledged that mutuals had the same disadvantage, he avoided putting regional banks and credit unions in the same category (after all BOQ has assets of $42bn).

Separately, APRA is yet to respond to submissions from mutuals for capital instruments that would meet the Basel III capital requirements.

Background

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Posted 21st May 2013 by David Jacobson in Credit unions, Mutuals

April 29, 2013

Use of “banking” by credit unions and building societies

The Australian Prudential Regulation Authority (APRA) has released for comment draft revised guidelines on implementation of section 66 of the Banking Act.

Sections 66 and 66A of the Banking Act place restrictions on the use of certain terms, for example ‘bank’, ‘banker’, ‘building society’ and ‘credit union’, when used in relation to a financial business.

The changes include:

  • that credit unions and building societies may use the expressions ‘banker’ and ‘banking’ in marketing and branding material to describe their banking services, but may not use the term ‘bank’.
  • that credit unions and building societies may not use the expressions the terms ‘banker’ and ‘banking’ as part of a registered corporate, business or trading name, or as part of an internet domain name by a credit union or building society; and
  • that ADIs with a mutual structure may use the phrase ‘mutual banking’.

Credit unions and building societies seeking to operate as a bank
APRA will, unless there are special circumstances, grant an ADI that wishes to operate as a bank and that holds at least $50 million in Tier 1 capital an individual consent to use or assume the expressions ‘bank’, ‘banker’ and ‘banking’ on an unrestricted basis. Unrestricted consent allows the ADI to use the expressions ‘bank’, ‘banker’ and ‘banking’ in its company name and trading or business names and to describe or to advertise its business.

However, in circumstances where the ADI has previously operated as a credit union or building society, APRA will impose transitional conditions upon the grant of such consent.

APRA’s policy is that an ADI cannot simultaneously:

  • operate as a bank with unrestricted consent to use the restricted expressions ‘bank’, ‘banker’ and ‘banking’; and
  • operate as a credit union or building society .

Further, an ADI that was previously a credit union or building society and that now operates as a bank will be required to take appropriate steps to ensure that members, depositors, other customers and the general public are clearly aware that it is now operating as a bank. APRA may, for instance, grant unrestricted consent to use the restricted expressions ‘bank’, ‘banker’ and ‘banking’ on the condition that the ADI use the word ‘bank’ in its corporate, trading or business name for a finite period.

Langes can advise credit unions and building societies on the implications of the proposed changes.

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Posted 29th April 2013 by David Jacobson in Credit unions, Legal, Mutuals

March 11, 2013

Credit unions and building societies changes

One of the consequences of a change of name by a credit union or building society to include "bank" is that APRA removes the entity from its credit union or building society lists to its bank list.

Since September 2011, 7 credit unions and 1 building society have transferred from APRA's credit union and building society lists to its list of Australian-owned banks.

As a result, APRA has moved statistics for mutual banks from the CUBS statistics to its bank publications.

Here are the Australian-owned mutual banks

Defence Bank Limited
Heritage Bank Limited
mecu Limited (trading as bankmecu)
Police Bank Ltd
Police & Nurses Limited (trading as P&N Bank)
QT Mutual Bank Limited
Teachers Mutual Bank Limited
Victoria Teachers Limited (trading as Victoria Teachers Mutual Bank)

APRA is proposing to replace its current separate publications with Quarterly ADI Performance Statistics (QADIP) from late May.

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Posted 11th March 2013 by David Jacobson in Credit unions, Mutuals
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