Mutual ADIs position for the future
The second annual KangaNews Mutual Sector Wholesale Funding Seminar took place in Sydney on 25 February. Discussions covered the sector’s performance and competitive position, access to wholesale funding markets, the potential for additional-capital issuance and how mutuals can incorporate technology to add efficiency in the treasury function.
"The bushfire crisis eliminated the federal government’s idea of balancing the budget and winding down government debt at all costs, and now with the coronavirus it will not blink twice about providing fiscal stimulus to industries affected. The government will go further down the fiscal track – it would be very unusual if it did not."
If smaller tickets come frequently, we can spend more time getting involved with and backing a securitisation programme. But if we look at a deal only every five years – when we have already been paid back – we have to get back up to speed with the programme and the business. There is much benefit from issuing frequently.
"We generally classify mutuals as nonbank financial institutions and the arrears and loss performance for this cohort is consistently below that of other classifications. It has a lot to do with the characteristics and attributes of the loans written, because mutuals have high-quality residential mortgage loan books."
"We don’t get a pricing benefit for our ethical debt issuance though it may come in the future. We undertook RIAA certification for other benefits: to build market experience, pioneer ethical investment free of fossil fuels, increase diversity, bring in ethical investors and showcase how ethical practice underpins the mutual-bank model."
"Issuing sustainability bonds is an effective way to communicate Bank Australia’s purpose to investors, and it enables us to talk about the impact assets we have on our books and the portfolio we are building. By linking these assets to a sustainability bond, we can talk to investors in detail and tell them our story."