The credit union and mutual bank love affair with SocietyOne and other marketplace lenders has drawn a stern caution from APRA.
Mark Adams, head of the specialised institutions divisions, signed an APRA letter sent this week that made clear the target of the reprimand was "an increasing number of small-medium sized ADIs participating in, or planning to participate in, initiatives outside their traditional business models."
Adams wrote that APRA's "particular concern is the growing number of ADIs entering into funding arrangements with third party lenders, with many of these arrangements involving P2P."
SocietyOne, mostly, but also the likes of RateSetter, are among fintech lenders drawing an ever increasing proportion of their funding from credit unions and especially larger mutual banks, this subset of ADIs finding P2P lending an easy if little noticed (by their members) route to rev up personal loan growth, a segment otherwise in decline.
Unity Bank, taking just one example, relies on SocietyOne for around three per cent of its receivables (which, proportionally, are included on Unity's balance sheet). The bank is also an equity investor in the largest and probably best known of the fintech lenders.
More than other 20 mutual banks and credit unions are funders of SocietyOne. One of these, G&C Mutual Bank, has its CEO David Taylor on the board of the P2P lender.
APRA is grumbling about "an inconsistent approach in how ADIs classify P2P funding exposures".
It is also pestering the sector "to establish risk appetite metrics to manage concentration to individual third party lenders as well as an aggregate concentration metric reflecting all third party arrangements."
In a dissenting view, one independent assessor sees virtue in such partnerships for credit unions and mutual banks.
S&P Global Ratings only yesterday, in an upgrade to "positive" on the ratings outlook for G&C Mutual Bank, found a lot of merit in alliances of the type now worrying APRA.
"We believe G&C's business strategy of diversifying into a small number of niche lending segments, through recently established partnerships, will help the bank diversify its business base," S&P said.
G&C, S&P said, originates much of its non-mortgage business through third parties such as Medpro and Lannock Strata Finance. It said it believed these partnerships "will help it diversify its residential mortgage dominated lending book, expand its member base, add a degree of geographic diversification to its New South Wales dominated lending."
S&P affirmed the BBB- long-term and A-3 short-term issuer credit ratings on G&C.