Mutual and Cooperative Sector

The Hon. T.T. NGO (15:39): I rise to speak in support of a financial system that recognises the value of cooperatives and mutuals, sometimes referred to as community banks, and that removes regulatory barriers that prevent them from reaching their full potential.

Last week, I attended the annual conference dinner of the Business Council of Co-operatives and Mutuals (BCCM), with a few of my colleagues in this house also attending. The BCCM is the national peak body for cooperatives and mutuals, including 99 of them based in South Australia, which are worth more than $40 billion. These include leading national and South Australian cooperatives and mutuals industries that play a vital role in the economy, including agriculture, financial services, motoring, manufacturing, retail, health, aged and disability care, and housing.

These organisations are reinvesting in our communities, serving more than 80 per cent of South Australians looking for finance, yet despite their strong credit metrics and lower conduct risk they are burdened with federal regulations that favour major banks. For example, some of the key disadvantages include higher capital requirements, because mutuals are required to hold more regulatory capital than major banks even when the underlying lending risk is identical. This structural penalty for being customer owned restricts their ability to lend, grow and invest in the communities they serve. Unlike the big banks, mutuals rely heavily on customer deposits and have limited access to low-cost wholesale funding. This makes their operations more expensive and less flexible, especially during economic downturns.

Complex and costly merger pathways are another disadvantage. When mutuals seek to merge for member benefit rather than for market dominance, they face lengthy and expensive processes. This discourages strategic consolidation and limits their ability to scale in responsible ways. Current frameworks treat mutuals and major banks alike, ignoring the differences in structure, purpose and risk profile. This one-size-fits-all regulation leads to unfair compliance costs that strain smaller institutions and divert resources from service delivery.

In countries like Canada and the United States, governments actively support mutuals through tax exemptions and funding programs. Despite the proven track record of stability and community impact that mutuals have demonstrated in Australia, we have much more limited policy recognition that has not yet caught up with what is happening in other nations.

During past financial crises government interventions favoured major banks, giving them competitive advantages in funding and stability. Mutuals, despite their prudence, were left with higher relative costs and reduced competitiveness. These disadvantages are real barriers that prevent mutuals from opening new branches, investing in technology and serving regional and suburban communities.

As major banks continue to close branches and cut staff, they leave behind an unmet need in many communities, which mutuals could step in and meet. What is missing is the incentive for mutuals to fill the empty spaces the disappearing banks on our streets are creating. Mutuals offer an alternative model of banking. They prioritise long-term outcomes, operate without conflict between shareholder returns and customer service and reinvest in the communities they serve. Most importantly, by supporting mutuals we protect competition. In doing so we prevent monopolies and give Australians real choice.

I want to take this opportunity to call on my federal colleagues to review some of the regulatory disadvantages mutuals face. If considered reforms are implemented, it would allow mutuals to offer more affordable housing finance and investment in regional communities and to compete fairly without compromising financial stability.