Mutuals get chance to take on big banks

Draft laws to boost competition in the finance sector have been welcomed by the smaller players in the market.

Australian Treasurer Josh Frydenberg speaks during Question Time.

Treasurer Josh Frydenberg is set to introduce new laws aimed at boosting finance sector competition. (AAP)

Making it easier for co-ops and mutuals to raise capital, invest and take on the big banks is the aim of changes proposed the Morrison government.

Treasurer Josh Frydenberg will join chief executives in Canberra on Tuesday to launch a package of new laws, under which mutual companies will be better defined and able to raise capital by issuing mutual capital instruments.

Melina Morrison, CEO of the Business Council of Co-operatives and Mutuals, said the package would enable mutuals to compete on a level playing field with other types of firms.

Credit Union Australia chief Rob Goudswaard said it would be a game-changer for the sector.

"It will make us much more competitive by giving us the flexibility to raise capital when strategic opportunities arise - this will be crucial as we look for ways to future-proof and grow our business, while continuing to improve the services we provide our members," he said.

At present, CUA funds such activities out of retained earnings, which restricted its ability to invest for the future.

"Access to capital will give us the ability to support the initiatives that provide the most benefit to members, whether they involve new technology initiatives, innovation collaborations, growing member services and products, or increasing CUA's geographical reach," he said.

Some mutuals have operated in Australia for almost two centuries, providing banking, insurance and retirement living services.

Australian Unity chief Rohan Mead said mutuals would play a key role in addressing a number of social challenges.

"A report we commissioned this year from PwC highlights that by 2025 we will need at least an additional $37 billion in funding to build and provide health, aged care, housing, disability care and other social services facilities," he said.

"Access to new forms of capital will mean that mutuals, which are able to take a patient, long-term view, can play a key role in helping address these looming challenges."


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Published 23 October 2018 at 12:04am
Source: AAP