A government push to bolster the appeal of customer-owned lenders has received moderate support from the industry, with less than half of the eligible credit unions taking up an offer to call themselves banks.
Victoria's Police Credit became the latest credit co-operative to call itself a bank, adopting the name BankVic at the weekend. It takes the number of customer-owned banks to nine.
The change, which will not alter its ownership structure, is the latest move by a customer-owned lender to take advantage of a Labor policy to strengthen the customer-owned sector, dubbed the "fifth pillar" in mortgage lending by Treasurer Wayne Swan.
As part of Labor's banking competition package of late 2010, the government asked the Australian Prudential Regulation Authority to fast-track approvals for credit unions that wanted to call themselves banks. The offer was open to more than 20 credit unions.
BankVic chief executive Peter Kempster said the decision to become a bank was designed to fuel growth and better explain its role to customers. Although credit unions and building societies are regulated in the same way as banks, there is a lingering perception among some customers that they are less secure.
"In effect, we've been as safe as a bank for a long time. We've been regulated as a bank for a long time, we provide banking services and it makes sense to call ourselves a bank," Mr Kempster said. "Younger members understand what a bank does. Regrettably credit unions are not as well understood."
Amid weak household credit growth, some credit unions think that becoming a bank may also help to boost customer numbers.
The Teachers Mutual Bank, which became a bank a little over a year ago, says the shift has made its role clearer to customers, and it has coincided with above-system credit growth.
"Our home growth has exceeded expectations, and is in spite of the slow economy and cautious home buyer market," Teachers chief executive Steve James said.
Customer-owned lenders can become banks only if they have $50 million in shareholder capital.
While some have embraced the government's offer, there are plenty, such as the country's largest credit union, CUA, that argue being a credit union is a core part of their appeal.
The debate comes amid frustration in the sector with the "multi-brand" strategies used by some majors, which tend to compete with credit unions.
"I think it's unfortunate that some of the major banks, through multi-brand strategies, are trying to convince some customers they are different in a way in which they are not," Mr Kempster said.