New reforms to fix regulatory ‘anomaly’ in banking sector

The Customer-Owned Banking Association (COBA) has welcomed the federal government’s release of draft regulations as part of the consultation process underway following the introduction of the Treasury Laws Amendment (Mutual Entities) Bill 2018.

The regulations are designed to improve access to capital for mutual banks, credit unions and building societies, currently restricted by existing provisions.  

“This will fix an anomaly in tax law that has restricted our sector’s capacity to issue the full range of regulatory capital instruments,” COBA CEO Mike Lawrence said.

“Our member banking institutions have been unable to issue convertible debt instruments because of uncertainty about such instruments’ tax status.

“Greater flexibility for our members to issue debt instruments that qualify as regulatory capital will help level the playing field between investor-owned banks and their customer-owned competitors.”

Following the announcement, Assistant Treasurer Stuart Robert said the release of the draft regulations was part of the government’s commitment to implement recommendations of the inquiry into reforms for cooperatives, mutuals and member-owned firms conducted by Greg Hammond OAM in 2017 – otherwise known as the Hammond Review.

“These important reforms improve access to capital, remove uncertainties and barriers, enabling cooperatives and mutuals to invest, innovate, grow and compete,” Mr Robert said.

Interest parties have been encouraged to provide their views regarding the proposed changes by 11 February, with draft regulations and explanatory material available on the Treasury website.

The COBA CEO concluded: “We congratulate the government and the opposition for their bipartisan support for this important reform agenda.”

[Related: Impending law to poise mutuals for faster growth]