Abacus Lobbying Priorities AM Institute Risk Forum – Barossa Valley, November 2012 Mark Degotardi, Head of Public Affairs Abacus
Apr 01, 2015
Abacus Lobbying Priorities
AM Institute Risk Forum – Barossa Valley, November 2012Mark Degotardi, Head of Public AffairsAbacus
2
Today
Identify some challenges in the operating environment
What on earth is lobbying anyway?
Identify some regulatory risks
Abacus’ main focus for 2013
Risks and opportunities for mutual ADIs
Questions
3
The Operating Environment
44
Strong fundamentals
18%
28%
10%
8%
30%
26%
7%
Estimated percentage of population by state who are members of mutuals
5
Strong fundamentals
6
Strong fundamentals
0.34%
0.16%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
Sep-10 Apr-11 Nov-11 J un-12
Comparison of Mortgage Arrears (90+ days)
Major Banks CUBSs
7
Customer Satisfaction at 31 October
Total Building Societies Total Credit Unions Total Mutual Banks Total Banks -
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Series1
88
Key providers in bank dominated market
Source: APRA & RBA
2.8% 1.3% 1.0%
93.8%
2.3%
Credit Unions
Building Societies
Mutual Banks
Banks Finance Co.
Market Share of Personal & Housing Lending OutstandingAugust 2012
99
But we have changed over time
Mutual Sector – Distribution of ADIs by asset size ($bn)
48%
28%
12%
6%6%
$4bn+ (L6)
$1bn - $4bn
$500m - $1bn
$200m - $500m
<$200m
Source: 2011 Mutual Sector Annual Reports
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Some reality checks in a tough market
1. Growth- below system for assets and deposits- At system for loans
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Some reality checks in a tough market
1. Growth- below system for assets and deposits- At system for loans
2. Profitability
- constrained (ROA at 0.56% vs 0.70% a year ago) reflecting margin pressure (10 bps decline)
- cost/income increasing (CUFSS group up 58bps, includes 81bps increase for $1bn+ group)
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Our environment - market
Source: APRANote: Mutual Banks Bankmecu, Defence Bank, Heritage Bank , QT Mutual Bank, Teachers Mutual Bank, and Victoria Teachers Mutual Bank excluded from the analysis.
0%
2%
4%
6%
8%
0%
2%
4%
6%
8%
Jun-97 Jun-00 Jun-03 Jun-06 Jun-09 Jun-12
Components of Profitability - Credit Unions% of Average Assets (J une 2012)
Net I nterest I ncome
Non-I nterest I ncome
Operating Expenses
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Our environment - market
Source: APRANote: Mutual Banks Bankmecu, Defence Bank, Heritage Bank , QT Mutual Bank, Teachers Mutual Bank, and Victoria Teachers Mutual Bank excluded from the analysis.
0%
2%
4%
6%
8%
0%
2%
4%
6%
8%
Jun-04 Jun-06 Jun-08 Jun-10 Jun-12
Components of Profitability - Building Societies% of Average Assets (J une 2012)
Net I nterest I ncome
Non-I nterest I ncome
Operating Expenses
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Some reality checks in a tough market
1. Growth- below system for assets and deposits- At system for loans
2. Profitability
- constrained (ROA at 0.56% vs 0.70% a year ago) reflecting margin pressure (10 bps decline)
3. Funding under significant pressure
- Major banks take share of deposit funding above 50%
- Term Deposits account for almost half of retail deposits at major banks
- Majors estimate further increase in funding costs for retail deposits
15
Our Environment - market
16
Lobbying and Politics
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Faith in Political Leadership
In my lifetime, we’ve gone from Eisenhower to George W Bush. We’ve gone from John
F. Kennedy to Al Gore.
If this is evolution, I believe in twelve years, we’ll be voting for plants.
Lewis Black
18
Our Environment – politics
Partisan divide hampers genuine policy work
Government likely to hold through mid/late 2013 but Gillard and Abbott both under pressure
Hockey, Robb havecommitted to FSI
Government annoyedat our calls forfurther reform(but this is OK)
Public apathy?
19
Lobbying – part of democracy?
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Lobbying – slightly stinky?
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Basic principles
Influencing decision makers–Recognition –Accommodation–Promotion –Risk reduction–Support–Solve problems
21
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Recognition
“Most importantly, as mutual organisations, credit unions and building societies always put their members first. They are not-for-profit lenders — so they put their profits back into cheaper interest rates, lower fees, and better customer service.”- Deputy PM, December 2010
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Strategy & tactics
Engage at all points in the policy development process: - Public debate- Consultations, reviews and inquiries- Legislation and regulation- Implementation- Oversight of regulators
Elections: a chance to extract commitments, lift profile
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What’s the message?
Decide the message; repeat the message
Political cliché that’s true: when the politicians and reporters are so sick of hearing something they want rip their own ears off, most of the voters are just picking it up
You’re the expert on your industry
Conflict sells – but avoid where possible
Always frame an issue from the consumer perspective; big banks can’t credibly do this (but they’re trying!)
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Take your chances
Public debates
Be available to media
Parliamentary inquiries
Govt policy development
Regulator policy consultations
Brief the Opposition – they’ll be the next Govt
Connect local CUBS with local MPs
“How can we help?”
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26
The Regulatory Environment
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Our Environment – regulation
Industry “exhausted”
CFR holds enormous sway and has written off concepts on RMBS, new guarantees, AOFM mandate expansion
Budget constraints impact even mild revenue issues making substantial reforms even harder
28
Competition: regulatory story (so far)
Positives: – Treasurer promotion of mutuals since 2010 – Banking competition policy centred on mutuals– Legislative recognition (eg covered bonds) – Deposit guarantee maintained at upper level proposed– AOFM support ($1.66bn utilised by mutuals)– FSAC representation, face to face meetings for larger members
Realities– Account switching, exit fee bans limited impact– AOFM boost limited to large mutuals,+B note issue– Major banks now dominate market on both sides– Significant proposals (eg Canadian style RMBS support,
expansion of guarantee for fee, AOFM mandate) rejected– Limited signs of member appetite on covered bonds (to date)– Regulator influence and dominance
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Lobbying Agenda – positive traction
Regulatory Wins
DG at upper range of $250K GST RITC Item 16 restored,
saving $1.6M annually APRA public commitment to
work on BIII capital issues Basel III liquidity FoFA carve-outs expanded to
benefit mutual ADIs Less prescriptive training
rules for ADIs on credit Changes to unclaimed
monies bill
More to do...
Secure concessions on BIII capital, liquidity
Mutual friendly capital supported and encouraged
Legislative fix on ASIC TD interpretation & BDPs
Position for “Wallis Mk II” Positive Credit Reporting Franking Credits & mutuals
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Regulatory Focus - 2013
Basel III capital
3131
Regulatory Challenges
Basel III and capital framework
• Capital impacts for mutuals
• Tier 1 Capital definitions
• Non-viability clauses
• Accelerated timetable
• Abacus response
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Basel III - capital
Senate Economics Committee9 August 2012
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Regulatory Focus - 2013
Basel III capital
Financial System Inquiry
Liquidity Standard
Review of APS120
Basic deposit product definitions
Comprehensive credit reporting
Payments reforms – EFTPOS, governance
FATCA
Taxation including franking credits
Bankruptcy
34
Positioning – more to do
Media profile is growing, media is changing
Recent release of DAE report generated TV, radio, print nationally
Increased focus on partnership with members – “talent”
Still relatively unknown, hugely outgunned
35
Media presence underpins our advocacy
Media report on usConsumers read/talk
about usGovernment hears us and
recognises our value
Building a balanced approach to Customer Owned Banking
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Risks and Opportunities
3737
Competition – not going away
The Perfect Storm
Have we got the balance right?
Cooperation?
Do we?
Sometimes impossible becomes reality
Thank you