Building societies, credit unions face challenge
Building societies and credit unions experienced a slowdown in deposit growth in the year to June 2004, a trend that posed a challenge to long term returns, KPMG argued in their annual review of the small deposit-taking sector. Denis Orrock, general manager of banking industry monitor InfoChoice, said that high yield online savings accounts were a threat to these institutions. They have traditionally offered high interest rates than banks to attract deposits to fund their home and personal lending. KPMG financial services partner Martin McGrath said that building societies now sourced more home loans through brokers, while credit unions sourced 29 per cent of home loans this way. McGrath also forecast a further reduction in the number of credit unions, which are under pressure from the bank regulator to merge.