APRA defines Tier 1 mutual equity interests

APRA has released the final amended Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (APS 111), which allows mutually owned ADIs to issue Additional Tier 1 (AT1) and Tier 2 (T2) Capital instruments that will qualify to be included in Common Equity Tier 1 (CET1) Capital provided they meet the requirements in Attachments B, F, J and K of APS 111.

To qualify, the capital instruments must provide for conversion into mutual equity interests (MEI) in the event that the loss absorption or non-viability provisions in these instruments are triggered.

Conversion into ordinary shares is not possible […]

Customer Owned Banking Code and third party products

The amended and renamed Customer Owned Banking Code of Practice commenced on 1 January 2014.

The Code of Practice (formerly the Mutual Banking Code of Practice), which applies to subscribing Credit Unions, Mutual Building Societies and Mutual Banks, was amended following the completion of an independent review.

While most of the changes reflect regulatory developments and general updating, it is worth noting the incorporation of the explicit commitment to take steps to ensure that third party service providers are reputable and third party products and facilities subscribers distribute are useful, reliable and of value to their members and customers.

The amendment was […]

Mutual Banking Code of Practice Annual Report

The Code Compliance Committee has released its Annual Report for 2012-2013 on the Mutual Banking Code of Practice.

The Report contains useful charts and tables which analyse complaints by service/product and the issues involved.

The breaches are mainly related to:
Privacy and confidentiality
Closure of accounts
Dispute resolution.

By |December 9th, 2013|Mutuals|

Changes to Mutual Banking Code of Practice

The Customer Owned Banking Association (COBA) has announced its agreement to sixteen recommendations in the Report by its independent consultant in its review of the Mutual Banking Code of Practice (MBCOP).

In addition, the MBCOP will be renamed “The Customer Owned Banking Code of Practice.”

The changes to the Code to take into account regulatory changes in the last 3 years. The changes include:
Responsible lending
Credit limit increase offers
Reverse mortgage loans
Third party service providers
Stopping of direct debits
Members with special needs
Governance arrangements

The new Code is scheduled to take effect from 1 January 2014.

By |December 4th, 2013|Legal, Mutuals|

Co-operatives National Regulations update

The Co-operatives National Regulations have been approved by all jurisdictions.

NSW and Victoria have confirmed their respective CNL laws will commence on Monday 3 March 2014.

The other jurisdictions are continuing to progress the consideration or development of their enabling laws that will introduce the CNL or alternative consistent legislation in their jurisdiction.


By |November 29th, 2013|Mutuals|

Mutuals: the prudential regulator’s view

One of the themes of Mutuals 2013 has been regulatory risks.

So the views of the APRA chair John Laker in his final speech to mutuals in that position were worth hearing.

Some of the points he made in his formal speech and the subsequent panel discussion were:

In denying APRA has an agenda to exit small ADIs he said: “We want…a vibrant and healthy mutual ADI sector made up of well-capitalised and well-managed mutuals that can “punch their weight” in a tough competitive environment. A sector that also provides room for smaller ADIs that have found their competitive niche. At the […]

By |October 30th, 2013|Legal, Mutuals|

A new form of capital: mutual equity interests

APRA has published draft amendments to APS 111 which allow for the issue of mutual equity interests by a mutually owned ADI.

APRA is proposing to allow mutual ADIs to issue Additional Tier 1 or Tier 2 capital instruments that could convert to Common Equity Tier 1 capital if the non-viability provisions are triggered.

Unlike listed public companies, conversion into ordinary shares is not possible for mutuals.

The conditions for the instrument will include the requirement for mutual equity interests to provide no voting rights (other than as required under the Corporations Act) and to limit both the claim of mutual equity […]

By |October 21st, 2013|Credit unions, Legal, Mutuals|

APRA Annual Regulatory Plan for Mutual ADI’s

APRA’s Annual Regulatory Plan for 2013-2014 provides a summary of APRA’s planned activities for regulatory changes in the current financial year as well as a summary of APRA’s finalised regulatory changes in the past financial year.

While the core capital reforms have been completed there are outstanding issues relating to amendments to facilitate the issue of non-common equity capital instruments by ADIs with a mutual corporate structure.

APRA proposes that the amendments to facilitate the issue of non-common equity capital instruments by ADIs with a mutual corporate structure will be effective in 2014.

By |August 27th, 2013|Mutuals|

Customers and membership of mutuals

From time to time we are asked whether all customers of a mutual must be members.

One of the factors that ASIC may take into account in determining whether a company is a mutual is whether each customer of the company is required to be a member of the company.

This depends on the the history, structure (as set out in the Constitution) and circumstances of the company.

In ASIC RG147 (“Mutuality – financial institutions”) ASIC accepts that while the requirement for all customers of a financial institution to be members is a relevant factor in determining whether the financial institution is […]

By |July 17th, 2013|Mutuals|

ASIC review of term deposit advertising

ASIC has released Report 353: Further review of term deposits (REP 353) that makes recommendations to improve advertising in relation to the automatic rollover of term deposits and the practice of dual pricing by authorised deposit-taking institutions (ADIs). (Background)

ASIC considers that it is important that investors have sufficient information to make a decision about whether to change their term deposit when it rolls over, particularly about the interest rate they will receive. ASIC considers that it is best practice for investors to receive this information both before and after the term deposit rolls over, so that they have ample […]