ARTICLE – FINANCIAL CO-OPERATIVES IN AUSTRALIA

In 2012, Australia recognises the United Nations International Year of Co-operatives. This article was contributed by Abacus. [endnote 1] It recognises the year by looking at the role of co-operatives in Australia's financial system.

In Australia, financial co-operatives are better known as ‘mutuals’. These are organisations that are owned by, and run for the benefit of, their current and future members (customers). They adopt a different business form to traditional corporations and differ in the way they behave and the reason they do business.

Australia’s mutual financial services sector comprises credit unions, mutual banks, mutual building societies and some friendly societies. These institutions bring competition and choice to Australian consumers. Under a mutual business model, institutions are customer-owned rather than investor-owned; each customer owns an equal share in the institution and has an equal say in its governance. Financial co-operatives are not run purely for profit, but instead put profits back into the products and services they offer to customers and the support they give to local communities.

The Australian financial co-operatives sector can be split into two broad categories:

• mutual banking institutions, comprising 92 credit unions, six mutual banks and seven mutual building societies and
• friendly societies (there are 10 friendly societies that operate in financial services).

Mutual banking institutions together have more than $85 billion dollars in assets and hold 11% of all deposits held with Authorised Deposit-taking Institutions (ADIs) in Australia.[endnote 2] Around 4.5 million Australians are customers. Mutual banking institutions offer a comprehensive banking service that includes savings, investment, loan and insurance products. They service metropolitan and regional areas, including Australia’s most remote communities, and some are bonded to particular industries or employers. As well as offering Internet and mobile banking services, they have one of the largest ATM networks in the country – the RediATM network.[endnote 3]

Friendly societies are like financial services companies. They provide consumers with ’life event’ products that are typically used to save for specific purposes such as secondary or tertiary education expenses, a deposit for a home, health and life insurance products and even weddings and funerals.

Mutual banking institutions and friendly societies operate under the same rules and regulations as their larger competitors. Mutual banking institutions are Authorised Deposit-taking Institutions (ADIs), regulated under the Banking Act 1959 (Cwlth). They meet the same stringent regulatory standards as the larger banks, as set by the Australian Prudential Regulation Authority (APRA). Friendly societies are regulated under the Life Insurance Act 1995 (Cwlth), and meet the same regulatory standards as larger life insurance companies. Like mutual banking institutions, friendly societies are overseen by APRA.


ENDNOTES

1. Abacus represents Australian credit unions, mutual building societies, mutual banks and friendly societies. <Back>
2. APRA, ABS, January 2012. <Back>
3. The RediATM network comprises over 90 credit unions, mutual banks and building societies, as well as several for-profit banks. <Back>