Credit unions and mutual building societies provide banking and other financial services to some 4.6million Australians and are highly-regulated, safe and secure financial institutions with total assets of more than $65 billion.
Australia's credit unions and mutual building societies are:
- Authorised Deposit-taking Institutions (ADIs) subject to the Banking Act 1959;
- Australian Financial Services Licensees subject to the Corporations Act 2001;
- Lenders regulated under the Uniform Consumer Credit Code;
- Subscribers to the Electronic Funds Transfer Code of Conduct; and reporting entities subject to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
- As at Oct 2008, subject to Goverment deposit guarantee (click here for more information)
Most credit unions and mutual building societies do not have credit ratings because they do not need a credit rating for their deposit-taking activities. Due to prudential regulation, ratings are not a requirement for any ADI raising retail deposits from the public.
However mecu has obtained a rating from Standard and Poors. We are the first Australian Credit Union to do so and indeed one of less than a dozen credit unions in the world to have sought and been issued a rating*.
As you will understand a credit rating is an opinion, purchased from an external agency such as Standard and Poors about a company's creditworthiness for debt instruments. The usual reason for obtaining a credit rating is to gain access to capital and wholesale debt markets. mecu has no exposure to either market and no plans or need to access either capital or finance.
Credit ratings from agencies such as Standard & Poor's are a means of assessing the creditworthiness of institutions for debt instruments. A rating from an agency such as Standard & Poor's is not focused on any risk attached to deposits placed in ADIs. ADI deposits are the subject of privileged treatment due to the depositor protection provisions in the Banking Act 1959.
All depositors placing funds with any ADI are equally protected by the prudential regulatory regime.
Credit unions and mutual building societies are subject to the same strict, legally-enforceable prudential standards as banks.
The prudential standards cover capital, liquidity, credit quality, large exposures, equity associations, operations risk, data risk, and audit and related arrangements for prudential reporting.
The Australian Prudential Regulation Authority (APRA) is responsible for setting and monitoring compliance with the standards. APRA collects and analyses prudential information from ADIs and carries out reviews and inspections of individual ADIs, including on-site visits. APRA can increase an individual ADI's minimum regulatory capital requirement in response to factors such as risk concentration.
Prudential standards and APRA's supervisory role are what distinguishes ADIs from all other institutions seeking funds in the market and explains why ADIs don't need a credit rating for their deposit-taking activities.
The promise that ADIs make to retail depositors that their deposits are safe and secure is underpinned by the Australian prudential regulatory regime.
mecu exceeds all relevant prudential standards and is a strong, profitable organisation with high levels of capital.
*Ratings are subject to change. For the latest ratings information please visit www.standardandpoors.com.au. Ratings issued by Standard & Poor's (Australia) Pty Ltd are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions.
