The "unleashing" of mutuals' capital raising options was intended as a step towards a more competitive financial services sector, to "provide Australian consumers with better choices and more cost effective options."That was the unambiguous intention of the Government in appointing former Mallesons partner Greg Hammond to review the sector and recommend changes to make it more competitive with banks.  A KPMG partner, Michael Cunningham, in an opinion piece on his firm's website, has described what a likely mutual bank bond might look like."Unlike the publicly listed banks, mutual banks have not been able to raise Tier 1 capital to fund growth or invest in services, instead having to fund such activities from retained earnings or debt, which is obviously more restrictive," he wrote."The creation of a new class of co-operative equity shares - which will not require voting rights to be attached, and will allow dividends to be capped, in line with mutual business models - will allow mutuals for the first time to have funding flexibility that could allow them to raise billions of dollars in fresh growth capital."Whilst APRA released a consultation paper on direct issuance of mutual equity interests on 26 July 2017, the changes announced on Wednesday this week will allow mutuals "to issue capital instruments without risking their mutual structure or status", the government said. Additionally, the government wants ASIC to ensure its enforcement of the demutualisation provisions in the corporate law does not hinder mutuals' ability to raise growth capital.APRA is understood to be close to finalising changes to its prudential standards that will allow customer-owned banking institutions to directly issue common-equity Tier 1 capital instruments, by changing its rules on what qualified as common-equity Tier 1 capital.The expectation is that that APRA will impose a 15 per cent cap on the total amount of the new instruments that can be issued as a proportion of total CET1. So, given that the current level of total shareholders' equity across the mutuals sector is approx. A$8.5 billion (mostly retained earnings) a quick back-of-the envelope calculation would mean the maximum amount of capital in the new shares that could be issued would be about $1.3 billion, which in turn equates up to an extra $25 billion in lending to their communities and client bases.The extra capital will allow them to invest in technology and digital enablement, helping them to tackle costs and so allow them to be a stronger competitive force in the Australian banking system.  Application of cost-cutting technology to support a strong Net Interest Income of 2.1 per cent vs. the majors at 1.7 per cent, will improve their profitability and organic generation of retained earnings, read capital, reinforcing a virtuous circle of capital creation and growth."Add to the mix Comprehensive Credit Reporting and Open Banking (never mind the BEAR and Banking Levy) and we have a clear government charm offensive against the major banks which will revolutionise the provision of banking products and services by breaking down customer inertia on changing banking service