CUFSS Limited

Who is CUFSS

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:

• Their long and fine history of forty to sixty (40-60) years of operation;
• Strong capital, and;
• The regulation of the Banking Act and prudential supervision of the Australian Prudential Regulation Authority (APRA).

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.

CUFSS' objectives are to:

• Protect the interests of Credit Union depositors; and
• To promote financial sector stability, particularly in relation to Credit Unions.

CUFSS functions are to:

• Administer the emergency liquidity support system;
• Monitor members' liquidity, capital & profitability;
• Advise members about liquidity and risk management;
• Assist the orderly exit of members by way of merger;
• Determine and arrange emergency financial support if required;
• Liaise closely with regulators.

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:

1. Provide financial and other information to CUFSS to permit monitoring;
2. Fund annual CUFSS operating costs by subscriptions based on member assets, and
3. Pledge a contingency commitment of a percentage of assets (currently 3.2%) for emergency liquidity support should it be required. Currently $1.4 billion dollars is pledged under the ISC.

As an industry support vehicle, this supervision system is independent from, and additional to, that undertaken by APRA.

The benefits of being a CUFSS member are:

• An extra protection shield for members' own depositors because of the available emergency liquidity support;
• Bolsters members own liquidity risk framework required under APRA Australian Prudential Standards (APS);
• Certified by APRA under the Banking Act (S11CB);
• The CUFSS minimum deposit requirement of 3.2% of assets is exempt from deduction from HQLA calculations and entirely controlled by the individual member;
• Members pay only a low annual subscription to fund CUFSS operations;
• CUFSS provides another level of information and access to advice;
• Members are responsible good corporate citizens in being part of an industry wide self funded and regulated liquidity system to protect members.

A current profile of CUFSS (as at September 2011).

• 88 Mutual ADI's & Cuscal are members
• CUFSS members have balance sheet assets totalling $46.9 billion representing 85% of total Credit Union industry and 88% of the total number of Credit Unions,
• CUFSS is administered by a Board of Directors currently of 5 with a maximum elected by members, 1 appointed by Cuscal and an independent Chair appointed by the other directors,
• CUFSS annual operating budget is around $400,000 and funded from levies paid by members according to asset size,
• CUFSS has its own capital/reserves of $46,000,
• Cuscal is CUFSS banker and service provider.

CUFSS MEMBERSHIP PROFILE AS AT SEPTEMBER 2011

Has the CUFSS emergency liquidity support system been successful?

Well in our view the answer is absolutely because since its formation

• No depositors have lost deposits or the interest due on them;
• No Mutual ADI liquidations or adverse reputation media stories about Mutual ADI safety have occurred;
• Early consultation between many Mutual ADI's & CUFSS has worked to successfully resolve issues or facilitate voluntary mergers that has protected member deposits and interests and even strengthened member access to banking services;
• Financial assistance has only ever been approved once under the ISC in twelve (12) years of operation resulting in the transfer of business of a member to another member and no reputation risk to the Mutual ADI industry;
• Close consultation has existed between CUFSS, APRA, Cuscal and Mutual ADI's;
• Quarterly statistical reporting and other consultation has helped all member ADI's in understanding industry and individual trends and in making better decisions for their organisations.

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