Four credit unions fold into Bendigo alliance

Bendigo and Adelaide Bank has confirmed plans for an "alliance" under which four small credit unions will, in effect, become franchises of the bank.

Banking Day reported an outline of the alliance in August, which includes AWA Credit Union, Berrima District Credit Union, Circle Credit Cooperative Ltd and Service One Credit Union.

The four credit unions will transfer around A$550 million in loans and around $620 million in deposits to Bendigo and Adelaide. This is equal to about one tenth of one per cent of the retail deposit market.

While all loans and deposits of the participating credit unions will be transferred to Bendigo, the reserves will remain "100 per cent member-owned". Each credit union will use their local branch staff to service members.

Bendigo said it would become "the approved deposit-taking institution and will assume responsibility for compliance, systems and balance sheet management."

If the proposal goes ahead the four credit unions will remain mutual financial services companies but give up their licences as authorised deposit-taking institutions.

Without the regulatory responsibilities of ADIs, the four alliance members could expect to achieve significant costs savings.

Bendigo and Adelaide Bank would pay the alliance partners for acting as its agents. Payments would take the form of a share of margins, as well as commissions.

The four have collaborated on a reduced version of a plan first conceived years earlier by Cuscal that would have rolled up a number of small credit unions into a single entity sharing a single balance sheet. That project was intended to give smaller credit unions survival options outside of a more conventional merger.

Bendigo said it expected "improved economies and cost savings" but did not spell these out.

Service One CEO, Peter Carlin, is spokesman for the alliance and said in a media release that the model was "compelling", enabling the credit unions involved to "remain true to their traditional ideals and values while positioning for growth in the changing financial market."

"Every financial organisation needs a clear plan to grow in the face of increased regulation and new technologies, by working with Bendigo to develop the Alliance model we have been able to achieve the best of both worlds for our members and for the communities we serve," Carlin said.

Circle Credit Union through its website reassured members that "this is not a merger, Circle will continue to be owned by you (its members)."

"Circle will remain an independent mutual financial services company, owned by you and all our Members. You will continue to hold shares in Circle and vote at member meetings," it said.

Bendigo and Adelaide Bank chief executive Mike Hirst said the bank had "a proven track record of working with organisations and communities on solutions to challenges they face. This is just one more example of that."
The agreement is subject to final approval from the Australian Prudential Regulation Authority and treasurer Joe Hockey, as well as 75 per cent of voting members at the respective credit unions' annual general meetings in December.