Banks understood better than Credit Unions
(4 June 2013 – Australia) As the Government pushes to bolster the appeal of customer-owned lenders – mostly credit unions – it has been revealed less than half of the eligible credit unions have taken up the offer to call themselves banks.
Victoria's Police Credit became the latest credit co-operative to call itself a bank, adopting the name BankVic at the weekend. It takes the number of customer-owned banks to nine.
The change, which will not alter its ownership structure, is the latest move by a customer-owned lender to take advantage of a Labor policy to strengthen the customer-owned sector, dubbed the ''fifth pillar'' in mortgage lending by Treasurer Wayne Swan.
As part of Labor's banking competition package of late 2010, the government asked the Australian Prudential Regulation Authority (APRA) to fast-track approvals for credit unions that wanted to call themselves banks. The offer was open to more than 20 credit unions.
Customer-owned lenders can become banks only if they have A$50 million in shareholder capital.
BankVic Chief Executive Peter Kempster said the decision to become a bank was designed to fuel growth and better explain its role to customers.
Although credit unions and building societies are regulated in the same way as banks, there is a lingering perception among some customers that they are less secure.
''In effect, we've been as safe as a bank for a long time. We've been regulated as a bank for a long time, we provide banking services and it makes sense to call ourselves a bank,'' Kempster said.
''Younger members understand what a bank does. Regrettably credit unions are not as well understood.''
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