Message from the CEO, Nina Schindler
As the year approaches its end, new beginnings emerge on the horizon. Indeed, as part of the European Association of Co-operative Banks’ (EACB) December General Assembly, members welcomed the Business Council of Cooperatives and Mutuals (BCCM) of Australia in their group.
This new membership opens up mutual opportunities for cooperation between the BCCM and the EACB. This strategic alliance expands the EACB's international reach, reinforcing its advocacy for cooperative banking. It strengthens the cooperative foothold in the dynamic Asia-Pacific region and the EACB’s role as global hub for regulatory and supervisory discussions affecting cooperative and mutual lenders. With a new member from a Basel Committee jurisdiction, the EACB uniquely articulates the cooperative narrative in the global regulatory discourse. In a time of converging supervisory and regulatory paradigms, our commitment to the ethos of cooperative identity remains resolute.
Amid these promising new beginnings, we must however also bid farewell to our EACB President, Berry Marttin. His imprint has been instrumental in taking the EACB onto a new path, confidently looking at the future. We are grateful for his dedication to the cooperative cause.
Closing the year 2023 on a high note, Berry Marttin, the outgoing EACB President, and Melina Morrison, CEO of the BCCM, shed light on the advantages of BCCM’s decision to join the EACB and share their perspective on this unfolding opportunity for the coming year.
3 Questions to Ms Melina MORRISON Chief Executive Officer, BCCM
Ms Melina Morrison has led transformative change on behalf of Australia's cooperatives for 25 years. As the inaugural CEO of the Business Council of Cooperatives and Mutuals (BCCM), Melina spearheaded crucial reforms to enable cooperative banks and other financial service cooperatives and mutuals to access capital for investment and growth. Melina advocates for cooperatives in all sectors of the economy including finance and insurance, agriculture, retail, housing and social care.
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- How does the current cooperative banking landscape in Australia look like?
Firstly, I wish to thank Nina, Berry and the EACB members for welcoming BCCM into the EACB family. It is an important step in reaching out beyond our borders to share what is unique about the Australian cooperative banking landscape.
There’s no getting away from the relative smaller size of cooperative banking in Australia when compared to the market share of cooperative banks in Europe. Yet, we share a common DNA, and the answer to many of the challenges of scale we face in Australia, is found in the example of our European EACB colleagues.
According to KPMG’s annual review of mutual (cooperative) banking in Australia, the current cooperative banking landscape is in robust health. Profits rose 27%, whilst sector asset growth slowed. Both lending and deposits grew despite the headwinds of inflation and climbing interest rates. But again, to the challenge of scale KPMG’s report showed many sector-wide challenges, such as the need to continue to invest in digital transformation, innovation and the costs of meeting increasing regulatory compliance, disproportionally impact cooperative banks due to their relatively small size.
Australia is a land of geographic contrasts from sunburnt desert plains to snow capped mountain peaks. This idea of contrast is mirrored in the financial services industry. Australia’s cooperative banks account for 70% of Australia’s total number of banking institutions but control just 3.5% of the country’s financial assets. This is largely explained by Australia having one of the world’s most concentrated banking markets, with the four majors (listed banks) controlling 90% of Australia’s financial assets.
Lack of scale relative to the overall number of cooperative banking institutions (57) and the overall membership base (5 million Australian customers) is a defining characteristic of the Australian coop banking landscape, and the reason driving the increasing pressure for consolidation.
- As CEO of BCCM, what do you consider the major challenges and priorities on the horizon for 2024?
The unprecedented disruption of the last three years from the global pandemic and, in Australia, a series of catastrophic climate-related natural disasters have impacted cooperatives in all sectors of the Australian economy. These challenges are set to continue into 2024 for cooperative banking which will be navigating potentially more inflation driven rate increases and the impact of cost-of-living pressures on their customer base.
We see our role as the peak body to help our members overcome competitive disadvantages such as the disproportionate cost of regulatory compliance by advocating for a world class business environment for cooperatives. We can do this well when we can point to better regulatory and legislative settings for cooperative banking overseas. We can do this very well when we join forces and learn from other jurisdictions about excellence in messaging on the need for corporate diversity in banking including more cooperative banks.
Regulatory supervision is the vital ongoing ‘hygiene’ work of peak bodies like EACB. However, for the BCCM the major challenges and priorities for 2024 are concerned with the strategic direction for the sector at a major pivot point for cooperative banking.
The relentless drive to consolidation in the sector offers both opportunity and disruption scenarios. Scaling with purpose and efficiency is a requirement in the face of increasing demands from members navigating sustained high inflation, unrelenting demands from the regulator, and shifting community expectations on ESG and data protection.
Added to this, Australian cooperative banks have no statutory protection from demutualisation, an omnipresent threat to the cooperative business model and to cooperatives being seen as mainstream and not an anachronistic form of banking.
We will be doubling down on our advocacy campaign for the Australian Federal Government to introduce new laws for cooperative banks and other mutual institutions to protect their legacy assets from distribution in the event of a corporatisation. Just as we learned from the legislative regimes in Europe to successfully introduce capital instruments that cooperative banks can issue without demutualising in Australia, we will point to the legislative protections for banking mutuals in Europe to influence Australian policymakers.
- How can the EACB and international cooperation with its members assist you in achieving these objectives?
It’s a truism of the cooperative movement that we sometimes skate over the power of the principle of “cooperation amongst cooperatives”. Collaboration is not only foundational to the ethos of cooperatives broadly but is also codified as the 6th international cooperative principle. Through our membership of the EACB we believe we will be able to action this principle for the benefit of Australian cooperative banks. We hope this exchange will also benefit EACB members with new insights. We are excited and energised by the opportunity to share information and key learnings across our jurisdictions.
Nina and Berry have pointed out some obvious shared narratives around the regulatory environment impacting banking across the world and how insights from different regions serves to strengthen our understanding of the cooperative difference overall. We are vitally interested in collaborating with the wider cooperative movement to increase the opportunities for cooperative banks to influence regulatory policies that work in the interests of cooperatives.
We share the objectives of the EACB to connect the purpose of cooperative banking with the positive economic and social outcomes we all want. We know our business model delivers these socio-economic benefits to the community and campaigning for market diversity can help influence policymakers to address discriminatory attitudes and practices towards cooperative banks.
That is why we look forward to and will be involved and learn from the EACB’s campaign to promote the cooperative business model.
We are delighted to be included in the EACB’s vision for a strong and flourishing global cooperative banking sector. Australia has a rich and proud history of cooperative banking, and it is time to join forces to learn from and stand beside our colleagues in Europe, Asia-Pacific and Canada. A united movement is more confident and more efficient and influential in demanding equal recognition and equitable treatment for cooperative banking in our national jurisdictions.
Second Opinion from Mr Berry MARTTIN ,President, EACB, & Member of the Managing Board, Rabobank
Mr Berry Marttin, over the course of his career, has gained extensive experience in both wholesale and retail banking holding various senior executive positions internationally. From 2009 onward, he joined the Managing Board with a special focus on Rabobank's international rural banking activities and further responsibilities. Outside Rabobank, he serves as a Member of the Supervisory Board of IDH (Sustainable Trade Initiative), Member of the Supervisory Board of ARISE and Member of the Board of EACB.
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It’s a great pleasure to welcome the Australian Business Council of Co-operatives and Mutuals (BCCM) to the EACB just before my retirement as president. This accession emphasises the position of our Association in the cooperative world as a leading lobbying institution and as a relevant platform of exchange and as a thought leader in cooperative banking. At the same time, the membership of the Australian cooperative banks of the 14th world’s largest economy is an important extension of our member base. I am convinced that we can provide multiple benefits to the BCCM, and this accession creates a win-win situation from which we shall mutually profit.
Much of the roots of cooperative banking lie in Europe, and during my international career at Rabobank I noticed that its principles and ideas have found followers all over the world. Strong and flourishing cooperative banking groups exist in the Americas, Asia, Africa and Australia. The exchange with members from these continents not only enriches our internal discussions and provides us with new perspectives and insights. The growing global footprint of the EACB also strengthens our voice towards international regulatory bodies and stakeholders. This will be increasingly important to ensure efficient advocacy especially on growing global issues.
For example, the 2023 market turmoil triggered by the failure of Silicon Valley Bank led to intensive discussions. In our view, it mainly demonstrated the dangers of sub-standard regulation. Some regulators and supervisors however went beyond this and drew the conclusion that any deviation from standard patterns of regulation and supervision is undesirable. In the ongoing and upcoming discussions on the regulatory consequences of the crisis, especially at the Basel Committee level, it will be more important than ever for the EACB to defend cooperative particularities, be it regarding capital, the management of risks or corporate governance.
Moreover, the International Accounting Standards Board (IASB) recently launched a consultation on an exposure draft on “Financial Instruments with Characteristics of Equity”. While cooperative member shares, as defined under IFRIC2, are not in the scope of this consultation, the exposure draft will nevertheless re-draw the line between equity and liability in many cases. This makes it a highly sensitive topic for us and a priority in the EACB’s work plan for 2024. The involvement and the support of our global member base will be very helpful in the upcoming exchange with the IASB.
Sustainability disclosure has become another area of global standard setting and a field of activity for us. In June, the International Sustainability Standards Board (ISSB) presented the first global sustainability disclosure standards. These standards create a common language worldwide for disclosing the effect of climate-related risks and opportunities on a company’s prospects. Many jurisdictions already recommend the use of International Sustainability Reporting Standards (ISRS) or even make them mandatory. For cooperative banks around the world, with their focus on members and communities, these standards will be essential. The EACB has been following the ISSB’s work from the beginning and will continue to do so.
Beyond these more technical issues, it is necessary to increase our efforts to promote the cooperative banking model. It’s important that regulators and politicians acknowledge their positive contribution to financial stability. It’s also important they do not look at cooperative banks as folkloristic “niche banks” but as important market participants operating all around the world and providing benefits to communities and financial markets alike. I am very satisfied with the launch of a communication project to build up a strong narrative for cooperative banking to bring cooperative banking into focus and to encourage politicians and regulators to think “cooperative”.
While I see important challenges lying ahead, I am glad to exit my EACB Presidency with an enhanced and very supportive member base, a united Board and a strong management and wish to say, “Good luck to you all”!