Moody’s Outlines Strengths of Customer Owned Model

Police Bank and its peak representative body, The Customer Owned Banking Association (COBA), today welcomed observations by ratings agency Moody’s about the strengths of the customer owned model in banking.

In a report out today, Moody’s sees strong balance sheets, conservative business models and an above-average degree of custom loyalty.

“Mutuals tend to deemphasise profit maximization in favour of providing value to members,” Moody’s says.

“Mutual franchises emphasise specific customer sets, community involvement and customer service, which support their strong customer satisfaction metrics.

“The mutual sector also enjoys consistently stronger asset quality than the listed bank sector.

“..the sector also boasts a very high level of capitalisation.”

“This report is timely as the Financial System Inquiry (FSI) gets into stride in its examination of the Australian financial system,” said COBA CEO Louise Petschler.

“The strengths of the customer-owned model are strengths for the financial system, contributing to stability and genuine consumer choice.

“A key issue for the FSI is how the regulatory framework promotes competition. COBA has identified at least nine examples of the regulatory framework’s failure to deliver competitive neutrality for the customer-owned model.

“The major banks have unfair advantages delivered by the regulatory framework that they can use to compete aggressively against smaller players.

“It is challenging for our sector to increase market share in this environment but we are maintaining our share of the household deposits market at around 11 per cent.”