The draft bill would amend the Corporations Act to add a definition of mutual banks and also lower the barriers to raise capital by mutual banks, credit unions and building societies.
The announcement is the latest step in a long process starting back in 2016 with a senate inquiry into mutuals and most recently the 2017 APRA mutuals famework.
The Customer Owned Banking Association chief executive Michael Lawrence said the amendment to the act was a significant step forward in promoting competition.
“This legislation will for the first time positively define the core elements of a mutual company in the Corporations Act,” he said.
The reform is an endorsement of the customer owned model and Mr Lawrence looked forward to bipartisan support for the legislative change.
“Customer-owned businesses are particularly well placed to deliver competition and choice in banking because we naturally put the customer first. We are profit-making but not profit-maximising,” he said.
Mr Lawrence said that currently mutual companies were not explicitly defined, and the demutualisation provisions would be amended by this new bill.
“These demutualisation provisions are to be retained for actual demutualisation proposals but are to be amended to make sure they don’t capture capital-raising proposals that do not change a company’s mutual identity,” Mr Lawrence said.
Mr Lawrence said that COBA will now consult with their members and stakeholders on the draft bill and looked forward to the final legislation.
“Greater access to regulatory capital means that customer-owned banking institutions are able to grow more quickly and undertake important investments, while remaining well capitalised.
“This allows our sector to write more loans and provide better quality services to current and prospective members. This will increase competition in the banking sector,” he said.
