The federal government has released for public consultation the exposure draft of the Treasury Laws Amendment (Mutual Entities) Bill, which would introduce a definition for a mutual entity; improve access to capital; remove uncertainties currently faced by the mutual sector; and reduce barriers to enable cooperatives and mutuals to invest, innovate, grow and compete.
The draft bill has been welcomed by the Customer Owned Banking Association (COBA), with its CEO, Michael Lawrence, describing it as a “historic reform”.
“We welcome this draft bill to amend the Corporations Act to increase our sector’s capacity to expand and take opportunities while staying true to our customer-owned model,” Mr Lawrence said.
“This legislation will for the first time positively define the core elements of a mutual company in the Corporations Act.
“This is a historic reform and a welcome endorsement of the customer-owned model.”
He added: “We congratulate the government for backing our model and, subject to consideration of the draft bill, we look forward to bipartisan support for implementing legislative change.”
Mr Lawrence noted that as it stands, mutual companies are not explicitly defined in the Corporations Act, which he said “does not distinguish between mutuals and non-mutuals, except for the demutualisation provisions”.
The COBA CEO said that the draft bill would retain demutualisation provisions for actual demutualisation proposals, but added that the provision would be amended to “make sure they don’t capture capital-raising proposals that do not change a company’s mutual identity”.
“We will now consult with our members and other stakeholders on the draft bill and we look forward to seeing the legislation finalised and introduced into Parliament as soon as possible,” Mr Lawrence said.
“Access to capital, particularly regulatory capital, is critical to our sector’s capacity to compete and grow.
“Customer-owned banking institutions have traditionally relied on retained earnings for their regulatory capital, supplemented to a limited degree by the issuance of capital instruments.”
He concluded: “Greater access to regulatory capital means that customer-owned banking institutions are able to grow more quickly and undertake important investments while remaining well capitalised.
“This allows our sector to write more loans and provide better-quality services to current and prospective members. This will increase competition in the banking sector.”