Presentation on theme: "Abacus Lobbying Priorities AM Institute Risk Forum – Barossa Valley, November 2012 Mark Degotardi, Head of Public Affairs Abacus."— Presentation transcript:
Abacus Lobbying Priorities AM Institute Risk Forum – Barossa Valley, November 2012 Mark Degotardi, Head of Public Affairs Abacus
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
8 8 Key providers in bank dominated market Source: APRA & RBA
9 9 But we have changed over time Mutual Sector – Distribution of ADIs by asset size ($bn) Source: 2011 Mutual Sector Annual Reports
10 Some reality checks in a tough market 1.Growth - below system for assets and deposits - At system for loans
11 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)
12 Our environment - market Source: APRA Note: Mutual Banks Bankmecu, Defence Bank, Heritage Bank, QT Mutual Bank, Teachers Mutual Bank, and Victoria Teachers Mutual Bank excluded from the analysis.
13 Our environment - market Source: APRA Note: Mutual Banks Bankmecu, Defence Bank, Heritage Bank, QT Mutual Bank, Teachers Mutual Bank, and Victoria Teachers Mutual Bank excluded from the analysis.
14 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
17 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 have committed to FSI Government annoyed at our calls for further reform (but this is OK) Public apathy?
22 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 22
23 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 23
24 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!) 24
25 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?” 25
27 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
29 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
31 Regulatory Challenges Capital impacts for mutuals Tier 1 Capital definitions Non-viability clauses Accelerated timetable Abacus response
32 Basel III - capital Senate Economics Committee 9 August 2012
33 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 us Consumers read/talk about us Government hears us and recognises our value Building a balanced approach to Customer Owned Banking