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ISCOVER
Staff Reporter
Australia’s second largest credit union, Australian Central Savings and Loans, has vowed to cut its interest rates if the federal government provides a level playing field for credit unions to compete with the banks.
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The credit union’s managing director Peter Evans said current rules governing access to wholesale funds were penalising credit unions and benefiting the big four.
“The Federal Government has talked up its desire to see a Fifth Pillar in the form of credit unions and mutual societies as a true competitive force against the banks,” he said.
“However, our mutual status puts us at a disadvantage when we are trying to source funds to lend to borrowers.
“The wholesale finance market uses credit ratings as the yardstick by which it measures risk. Because the vast majority of mutual organisations do not have credit ratings, we are perceived as a higher risk and therefore incur an additional cost on the funds we are trying to source.”
Mr Evans said mutual and credit unions simply cannot raise funds on equal terms with banks, which affects the unions’ ability to be competitive on mortgage rates.
Mr Evers said the federal government could introduce a mechanism to “level the playing field”.
“What we want the Government to recognise is that credit unions are regulated by the Australian Prudential Regulation Authority – just like the banks. We operate under the same rules and are subject to the same governance,” he said.
“Because we are an APRA-registered organisation, we should be given the same pricing as the big banks for wholesale funds.
“The Government should adopt that framework and stand behind it as a mechanism to allow credit unions and mutual organisations to access more competitive finance.”
