Sector supports focus on customers

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17 March 2020: 

The Customer Owned Banking Association (COBA) has welcomed moves by regulators to revisit the timing of new regulatory measures to give banking institutions more capacity to focus on their customers.

“The customer owned banking sector has been serving Australians for more than a century and is in a strong position to cope with the disruption caused by COVID-19 and to continue to put customers first,” said COBA CEO Michael Lawrence.

“Our sector is well capitalised, with an average capital ratio of 17%. This is significantly higher than the ‘unquestionably strong’ capital ratio benchmark of 10.5% announced in 2017 by the banking regulator APRA.

“Our sector has an average liquidity ratio of 16%, which is significantly higher than APRA’s minimum benchmark of 9% for liquidity holdings.

“Customer owned banking institutions are strongly-regulated, prudent lenders that are well-prepared to look after their 4 million customers during this period of disruption.

“We are very supportive of the announcement by the Council of Financial Regulators that council members are examining how the timing of regulatory initiatives might be adjusted to allow financial institutions to concentrate on their businesses and assist their customers.

“Re-scheduling of regulatory measures could help to free up resources to focus on customers.

“The number one focus of credit unions, building societies and mutual banks is always their customers so we applaud this sensible approach from our regulators.

“Customers who need assistance due to the impact of COVID-19 on their financial situation should contact their banking institution.”

Key Facts:

Strong capital

Our capital ratios are well-above APRA’s ‘unquestionably strong’ benchmark and regulatory minimums.

  • This shows we are well-capitalised like the rest of the Australian banking system.
  • APRA outlined a benchmark of CET1 10.5% for ‘unquestionably strong’ by international standards in June 2017.
  • Our sector has an average capital ratio of over 17%.
  • The vast majority of our sector’s capital is Common Equity Tier One (CET1) capital – the highest quality capital available.

High liquidity

Our sector’s average liquidity ratio is around 16%.

  • This is well above APRA’s regulatory minimum liquidity holdings ratio of 9%.
  • Our members have access to additional liquidity if needed through arrangements with the Reserve Bank of Australia or through other liquidity support measures.

Strong regulation

Our sector is regulated under the Banking Act 1959 by the same regulator as the major banks, i.e. APRA, and is subject to the same prudential policy and supervision framework.

All our members are incorporated in Australia and authorised by APRA as Authorised Deposit-taking Institutions (ADIs).

  • This means all customer owned banking institutions, i.e. mutual banks, credit unions and building societies, are covered by the Financial Claims Scheme.
  • This provides a Government guarantee for deposits up to $250,000 for each account holder on a per ADI license basis.

High asset quality

Our sector has a non-performing loans ratio of 0.36% which is well below the ADI system.

  • Recent APRA data showed a non-performing loans ratio of 0.90% for all ADIs.
  • This reflects our sector’s conservative approach to lending.

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