One Country's View On What 'Credit Union' Means

Credit Union Journal | Monday, December 17, 2012

By Frank Diekmann

Imagine this actually happening here. The country's largest savings banks and largest credit unions come together and agree to henceforth be known as "mutual banks." Both swear off ever using those two-word identifiers-savings bank and credit union-ever again. They even sign on with the same trade group.

It's a long shot to ever happen in this country, but it has already taken place in a country, in this case Australia. Since September of 2011 five of Australia's largest credit unions and one of its largest building societies began rebranding themselves as "mutual banks." Two more credit unions have since adopted the common bank branding, and according to one person at least 10 large credit unions are considering doing the same.

Something else you're not likely to see north of the equator: all of those institutions, in addition to mutual building societies, mutual banks and friendly societies, have come together in Australia as part of Abacus Australian Mutuals, which is the industry trade association. There are some 120 in all, totaling (A)$83 billion in assets and 5.5 million members in a country of 22 million. Four major banks, however, hold major marketshare.

All of it has come about as part of a discussion that echoes some of what is commonly discussed among U.S. credit unions, while other factors are unique Down Under.

The 'Key' Word

"In our regulatory setting, banks, building societies and credit unions are all treated the same way," explained Louise Petschler, CEO of Abacus. "Having a harmonized regulator does make the adoption of bank branding easier."

The second factor is that mutuals were already in an alliance, explained Petschler in remarks recently in Las Vegas. Abacus was formed in 2005 to represent mutuals across five different-but-not-so-different industries. "Mutuality is the key, not 'type' of deposit institution. Abacus (members) see themselves as 'mutuals,' not credit unions or building societies."

The third factor driving the decision to brand as "banks" was the economic downturn, which was actually quite brief in Australia, where the export of natural resources has been booming. "The government actually urged people to move their money into one of the big four (banks)," said Petschler. "But the government has opted to 'build a new pillar' in the banking system by supporting the mutual sector."

The common trade group and branding also stemmed from Australian's perceptions about mutuals, including that they care about consumers, offer low fees, are community based, and are ethical. The perception negatives, said Petschler, include perceived lack of access points and, frustratingly, being seen as not good at managing money.

That's not all that will sound familiar to American CU leaders. "Most people don't know what a credit union is," offered Petschler. "That's the shocking and surprising thing we who work in credit unions always have to remember...Some of the credit unions that have adopted mutual bank branding say they did so to make it easer to say we offer banking services and to make it clearer who could join...

"Rules limt the transition to 'mutual bank' to only the largest institutions. The same rules also make it harder to demutualize and become a commercial bank. Two recent efforts were voted down."

'What's In A Name?'

"What's in a name?," Petschler asks of the words "credit union." "If there is no change to the mutual model, if members remain in control, if the institution is consistent with International Operating Principles, if it's already part of a common 'mutual' group, and if there are no new demutualization opportunities, does it matter? The Abacus board has concluded that no, it doesn't."

Petschler doesn't expect the Aussie model will be exported to U.S. anytime soon.

"In the U.S., I don't think there will ever be a day when two competing groups, enemies really, will ever come together because you do not have shared DNA," she said.