The Treasury Laws Amendment (Mutual Entities) Bill 2019 has passed Parliament on Thursday (4 April), after being introduced in February.
After the bill receives Royal Assent, mutual banks, credit unions and building societies will be able to raise capital more easily and grow, as previous provisions had restricted the customer-owned banking sector’s capacity to issue the full range of regulatory capital instruments, such as convertible debt instruments, due to uncertainties around their tax status.
The new bill includes a new definition for a mutual entity as a company where each member has no more than one vote; changes to demutualisation rules to ensure that it is only triggered by an intended demutualisation, not by other acts such as capital raising; and the creation of a mutual-specific instrument that can be used to raise capital.
During the first reading of the bill in Parliament, Assistant Minister for International Development and the Pacific Anne Ruston said: “Our reforms will mean more opportunities for mutual organisations by allowing them to raise the funds they need to make long-term investments for the benefit of their members and to compete effectively with shareholder-owned companies for the benefit of all Australians.”
Welcoming the passage of the bill, the CEO of Business Council of Co-operatives and Mutuals, Melina Morrison, said: “In this era of accountability, we are pleased for our members that all sides of Parliament have acknowledged the social conscience of our sector and supported the reforms recommended by the independent Hammond Review in 2017.
“This landmark reform is the first enabling legislation for federally registered cooperatives and mutuals in 20 years, and we thank both major parties for the ongoing bipartisan support that has led to the changes.”
Ms Morrison continued: “The changes level the playing field and give mutuals the opportunity to compete with the larger, listed entities, including the big banks.
“Stakeholder-owned business models ensure customers are put first in all transactions. As seen in the findings of the banking royal commission, traditional profit-driven companies are facing ongoing criticism, and these legislative reforms confirm the strength of mutuals as a customer-led business model.”
The Customer Owned Banking Association similarly welcomed the passage of the bill, with CEO Michael Lawrence saying: “Passing this bill during the busy budget sitting week and with a full parliamentary schedule is testament to just how important these reforms are for competition in the banking sector.
“Our sector is grateful for the support and advocacy from both sides of politics, particularly co-chairs of the Parliamentary Friends of Mutuals and Co-operatives, Bridget McKenzie and Dr Andrew Leigh, for their unwavering commitment to passing this bill.”
[Related: New bill to level playing field for mutuals]
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Tas Bindi is the features editor on the mortgage titles and writes about the mortgage industry, macroeconomics, fintech, financial regulation, and market trends.
Prior to joining Momentum Media, Tas wrote for business and technology titles such as ZDNet, TechRepublic, Startup Daily, and Dynamic Business.