Banks call for crackdown on church "development funds"

The Australian Bankers Association has called upon the federal bank regulator to stop non-profit church development funds from acting as quasi-banks.

Courier Mail reports that the "development funds" of some churches are accused of being quasi-banks, prompting a crackdown by the Australian Prudential Regulatory Authority (APRA).

The funds, operated mostly by the Catholic and Anglican churches, offer financial services like term deposit and cash management accounts to their parishioners.

Loans can be made to church-backed schools but the funds must remain not-for-profit. Eftpos and automatic teller machines cannot be offered to customers and cheque accounts are allowed on a limited basis.

Australian Catholic Bishops Conference general secretary Fr Brian Lucas said the funds also managed the internal finances of the churches in each of the participating dioceses. Investors in the funds, he said, were not driven by profit and wanted to donate to the church.

According to the Courier Mail, APRA has devised a new set of rules to ensure the funds are not operating too similarly to major banks.

Anglican Church general secretary the Rev Bruce McAteer said the changes would mean little for funds already operating.

"APRA has decided that perhaps we have been a little bit too much like banks," he said. "And so they have just changed the rules under which we operate."

Forty-seven funds have been made exempt by APRA from the Banking Act, meaning they do not have to lodge annual reports or undertake any of the compliance required by the traditional banks. As a result, APRA does not know how big the funds are, the value of their assets or the risks (liabilities) they might hold.

Australian Bankers Association chief executive David Bell now wants the funds to adhere to the same rules as banks.

"If any organisation, including a religious organisation, is acting as a bank or providing banking services, then they should be subject to the same regulation as banks in the interest of their customers," he said.

"The community expects that institutions offering banking services are managed prudently to a high standard."

Churches face finance curbs (Courier Mail 7/7/06)

LINKS (not necessarily endorsed by Church Resources)
Australian Prudential Regulation Authority

Possible regulation challenge for Development Funds (CathNews, 28/10/05)

7 Jul 2006