AM Institute Risk Forum Barossa Valley November 2012 Mark Degotardi Head of Public Affairs Abacus Today Identify some challenges in the operating environment What on earth is lobbying anyway ID: 794867
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Slide1
Abacus Lobbying Priorities
AM Institute Risk Forum – Barossa Valley, November 2012
Mark Degotardi, Head of Public Affairs
Abacus
Slide2TodayIdentify some challenges in the operating environment
What on earth is lobbying anyway?Identify some regulatory risksAbacus’ main focus for 2013Risks and opportunities for mutual ADIsQuestions
Slide3The Operating Environment
Slide44
Strong fundamentals
18%
28%
10%
8%
30%
26%
7%
Estimated percentage of population by state who are members of mutuals
Slide5Strong fundamentals
Slide6Strong fundamentals
Slide7Customer Satisfaction at 31 October
Slide88
Key providers in bank dominated market
Source: APRA & RBA
Slide99
But we have changed over time
Mutual Sector – Distribution of ADIs by asset size ($bn)
Source:
2011 Mutual
Sector Annual Reports
Slide10Some reality checks in a tough market
Growthbelow system for assets and depositsAt system for loans
Slide11Some reality checks in a tough market
Growthbelow system for assets and depositsAt system for loans
Profitabilityconstrained (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)
Slide1212
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.
Slide1313
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.
Slide14Some reality checks in a tough market
Growthbelow system for assets and depositsAt system for loans
Profitabilityconstrained (ROA at 0.56% vs 0.70% a year ago) reflecting margin pressure (10 bps decline)
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
Slide15Our Environment - market
Slide16Lobbying and Politics
Slide17Faith 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
Slide18Our Environment – politics
Partisan divide hampers genuine policy work Government likely to hold through mid/late 2013 but Gillard and Abbott both under pressureHockey, Robb havecommitted to FSI
Government annoyedat our calls forfurther reform(but this is OK)Public apathy?
Slide19Lobbying – part of democracy?
Slide20Lobbying – slightly stinky?
Slide21Basic principlesInfluencing decision makers
Recognition AccommodationPromotion Risk reductionSupport
Solve problems21
Slide22Recognition
“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
Slide23Strategy & tacticsEngage at all points in the policy development process:
Public debateConsultations, reviews and inquiriesLegislation and regulationImplementation
Oversight of regulatorsElections: a chance to extract commitments, lift profile
23
Slide24What’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 upYou’re the expert on your industryConflict 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
Slide25Take your chancesPublic debates
Be available to mediaParliamentary inquiriesGovt policy developmentRegulator policy consultations
Brief the Opposition – they’ll be the next GovtConnect local CUBS with local MPs“How can we help?”
25
Slide26The Regulatory Environment
Slide27Our 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
Slide28Competition: regulatory story (so far)
Positives: Treasurer promotion of mutuals since 2010 Banking competition policy centred on
mutualsLegislative recognition (eg covered bonds) Deposit guarantee maintained at upper level proposedAOFM 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) rejectedLimited signs of member appetite on covered bonds (to date)
Regulator influence and dominance
Slide29Lobbying 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
Slide30Regulatory Focus - 2013
Basel III capital
Slide3131
Regulatory Challenges
Basel III and capital framework
Capital impacts for
mutuals
Tier 1 Capital definitions
Non-viability clauses
Accelerated timetable
Abacus response
Slide32Basel III - capital
Senate Economics Committee9 August 2012
Slide33Regulatory Focus - 2013
Basel III capital Financial System InquiryLiquidity StandardReview of APS120Basic deposit product definitions
Comprehensive credit reportingPayments reforms – EFTPOS, governanceFATCATaxation including franking creditsBankruptcy
Slide34Positioning – more to do
Media profile is growing, media is changingRecent release of DAE report generated TV, radio, print nationallyIncreased focus on partnership with members – “talent”Still relatively unknown, hugely outgunned
Slide35Media presence underpins our advocacy
Building a balanced approach to Customer Owned Banking
Slide36Risks and Opportunities
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Competition – not going away
Slide38The Perfect Storm
Slide39Have we got the balance right?
Slide40Cooperation?
Slide41Do we?
Slide42Sometimes impossible becomes reality
Slide43Thank you