The pitch of the sirens is rising around APRA as they ponder the credit union sector in Australia.
Banking Day is a fanatic for reading annual reports and in this sector some themes are common.
The low interest rate environment makes trading tough, drags on margins and profits and exaggerates our already severe difficulties keeping with up with the compliance burden and stay-in-business investments is the gist of many of the writings of chairs and CEOs in the 2018 collection. They've said the same for years.
This is worse from this week thanks to the easing of monetary policy that is underway.
This shows every sign of turning much worse for minnows once cash rates are heading at some places under one per cent - and select credit union profits converge toward zero.
Hundreds of credit unions have merged with others over the years, with only around 70 left.
How many more may be escalating this option? That's approaching 20, the largest of these with barely $200 million in assets and half with less than $100 million in assets.
Credit Union Australia is a world away from these dilemmas, the leader in the mutual ADI sector already richly capitalised and careful over profits and being sure to afford its digital smarts and scheme to outrun the fintech dreamers.
In a signal to all mutual banks and credit unions, CUA has rationed the 25 basis points rate cut that is the market norm. Most mortgage customers will feel the benefit of a cut in home loan interest rates that matches the RBA and the market norm, but some will not. Reductions of ranging from 10 bps to 15 bps will be applied to the most keenly-priced of CUA's mortgage product mix.
Partly, this is to ensure "more than 90 per cent of savings accounts will be buffered from the full impact of the rate cut," CEO Rob Goudswaard said yesterday.
"Being a mutual, CUA's focus is on acting in the best interests of all members, which means we have decided to distribute the rate changes as equitably as possible across our broad portfolio of accounts."
Goudswaard said "market forces, rather than the RBA cash rate, are the primary driver of CUA's funding costs … our lending margins are among the tightest in the market and this decision ultimately impacts profitability."