Credit unions to call themselves banks
Canberra is moving quickly to allow all credit unions and building societies to use the term ‘bank’.
The Government announced in the 2017-18 Budget that it will reduce regulatory barriers to entry for new and innovative entrants to the banking system by lifting the prohibition on the use of the word 'bank' by authorised deposit-taking institutions with less than $50 million in capital.
Today, Canberra is seeking stakeholder views on the draft bill which introduces this measure.
According to COBA, credit unions and building societies are Authorised Deposit-taking Institutions (ADIs), like banks, and are subject to the same prudential regulatory framework as banks and the Government’s deposit guarantee under the Financial Claims Scheme.
“It makes sense that all ADIs should be able to choose to use the term ‘bank’ to explain what they do – which is banking,” said COBA chief executive Mark Degotardi.
“The historic restriction on use of the term bank by ADIs with more than $50 million in capital is out of date and no longer relevant. We welcome the Government’s move to level the playing field.
More to follow
The lobby group head noted that there are already 18 customer-owned banks providing competition and choice in the retail banking market. These former credit unions and building societies are likely to be joined by many of the 60 other customer owned banking institutions currently trading as credit unions and building societies.
“Some credit unions and building societies may prefer not to rebrand but at least now they will have a choice," said Degotardi.
“This draft legislation is the latest installment of the Government’s agenda to promote competition in banking. COBA congratulates the Government on its commitment to this agenda and its delivery of positive reform.
“We look forward to engaging with the Government on the draft legislation.”
The consultation on the draft Bill will close on Monday 14 August 2017.