The majority of Australian Mutual ADI's have established a self-regulatory system "CUFSS Limited" as an additional protection for depositors and in addition to:
CUFSS is the Australian Mutual banking industry self-funded and operated "emergency" liquidity support scheme. It is certified by APRA under s11CB of the Banking Act 1959.
Each individual CUFSS Member's commitment to the system is through the Industry Support Contract (ISC), which sets out their obligations, rights and responsibilities.
Essentially it locks in all parties to:
As an industry support vehicle, this supervision system is independent from, and additional to, that undertaken by APRA.
CUFSS was established in 1999, by 180 Credit Unions and Cuscal (Note 1) during the transfer to Commonwealth regulation, which replaced statutory provisions under the state-based Financial Institutions (FI) regulatory scheme.
The FI Scheme provided for a system of emergency liquidity and solvency support through the Emergency Liquidity Support Scheme (ELSS) under direction from the Australian Financial Institutions Commission (AFIC), and State-based contingency funds. CUFSS replaced these statutory requirements with a system of self- regulation funded by members, utilising the operational capacity of Cuscal as its banker and that of each member.
Mutual ADI participation in CUFSS and the continuance of an industry support scheme continue to provide a valuable additional protection to Mutual ADI depositors above that afforded by the APRA regulation of the Banking Act.
In addition to the certification of the ISC under the Banking Act, APRA has confirmed that it will recognise membership in the industry support scheme as a factor taken into account, when they assess ADI risk management framework particularly in terms of capital adequacy, liquidity and operational risk.
In the rare circumstances where a CUFSS member requires support beyond that available from their bankers, CUFSS can determine that such support be provided directly from the balance sheets of all participating members. This decision is based on CUFSS review and circumstances.
CUFSS has the capacity to decide whether the support is in the form of a market rate loan, a concessional loan or a permanent loan (the latter category would only be provided in circumstances where a member is to merge or transfer).
CUFSS can and does often provide advice to a member on before or when deciding to provide financial support. Investigations and monitoring processes are included in CUFSS operations.
CUFSS decides the terms and conditions applying to financial support. CUFSS’ determination that support should be provided, if accepted by the ‘assisted’ member, will bind all participating members to contribute.
Conditions applying to the provision of support will be stringent and may require the assisted member to appoint an external administrator or cease certain business activities.
CUFSS has been pro-active in monitoring Mutual ADI performance and where necessary in consulting and conducting reviews and on-site assessments on a number of credit unions, as well as establishing a cooperative relationship with APRA on the monitoring and investigation function which CUFSS performs. CUFSS has an aim to extend coverage to 100% of the Mutual ADI industry.
Well in our view the answer is absolutely because since its formation:
CUFSS Constitution adopted 20 October 2017.
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