An overhaul of a 22-year old co-operative liquidity support arrangement for credit unions and mutual banks is ready for a bold recruitment campaign by CUFSS Ltd to rejuvenate the scheme.
“We’ve done the important restructuring whereby CUFSS can continue to play a significant support role for mutual ADIs,” Michael Fenech, executive officer (and sole employee) told Banking Day.
For the last three years the CUFSS board has been undertaking “a major re-engineering of the emergency liquidity scheme to ensure it remains relevant and viable whilst ever there is a group of mutual ADIs with the need for access to emergency liquidity support,” Fenech said.
In March CUFSS negotiated re-certification by APRA as an “approved emergency liquidity arrangement for ADIs that satisfies the requirements of APS210”.
This was achieved following implementation of a roughly A$10 billion increase in the available Emergency Liquidity Pool via the RBA agreeing to provide emergency funding underpinned by recourse to the internal securitisation programs of the larger CUFSS members.
CUFSS also implemented an enhanced annual crisis testing program.
Only 38 of the 60 mutual ADIs left in Australia are now members of CUFSS, following the progressive withdrawal of four of the larger credit unions (these days trading as mutual banks) over the past five years.
Former building societies were never part of the CUFSS system but are now eligible to join.
“A number of the bigger mutuals are starting to reflect on their move away from the industry scheme, and see benefits in reconnecting,” Fenech said.
For now, internal consultations have clarified there is no appetite among mutual ADIs to broaden membership of CUFSS to non-mutual banks, though this concept has had support from the Reserve Bank.
According to Fenech, in the early phase of the Covid-19 pandemic CUFSS actively engaged in brokering funding deals, both between CUFSS members and between large fund managers and individual mutual ADIs.
“We found large insurance companies and superannuation funds were making unexpectedly large withdrawals as they prepared to cater to claims under the early redemption scheme,” Fenech said.
“CUFSS had timely access to mutual ADI data which allowed us to source and mediate funding to support members’ liquidity needs.”
CUFSS holds its annual general meeting tomorrow at which Bruce Williams will retire as chair after six years. David Taylor, the former CEO of G&C Bank will replace him.