Report signals party is over for Australia's big four banks
Updated: Jun 14
OFFICIAL recognition of banking as an essential service, the end of self-regulation of the banking industry and a pathway forward for the consideration of a new government bank are some of the key recommendations to come from a Senate inquiry into the impact of regional bank closures.
The final report, released this afternoon, also sets out plans that would see the Federal Government underwrite community bank branches in regional, rural and remote Australia using funds raised through a levy on the major banks.
“Bank branch closures are devasting to many regional and remote communities,” the committee said in the report.
“Along with an increased need for cash, regional and remote communities are more dependent on face-to-face services. Many have a higher proportion of elderly, Indigenous and/or disabled populations, and may be particularly exposed by bank branch closures.
"Vulnerable residents and small businesses may be left 'high and dry', or forced to drive hundreds of kilometres to the nearest bank to complete essential and basic financial tasks.
“As well as disadvantaging individuals living in regional and remote areas, bank branch closures—particularly the closure of a community's last bank—often have a devastating effect on the town's morale. The loss of a town's last bank causes downstream economic impacts: businesses failing, other services relocating and people moving to be nearer to essential amenities.
“The committee believes Australia's banks are failing to take these impacts seriously. In many cases, banks are simply walking away from communities where they have been a mainstay for decades.”
The inquiry spanned 15 months, held 13 hearings across Australia and received 608 submissions.
The recommendations are:
The committee recommends that the Australian Government adopt a policy recognising access to financial services as an essential service. To this end, it should commit to guaranteeing reasonable access to cash and financial services for all Australians.
The committee recommends that the Australian Government commission an expert panel to investigate the feasibility of establishing a publicly owned bank. In investigating this, the panel should examine options including, but not limited to a stand-alone public bank or one associated with, and using the branch network of Australia Post.
The committee recommends that the Australian Government urgently develop a mandatory Banking Code of Conduct or Customer Service Code (Code), incorporating a robust branch closure process, to be administered by a regulator with expertise in consumer protection.
The new Code would require financial institutions to:
undertake meaningful consultation with communities before a branch is closed;
prepare and submit a comprehensive report on the potential impacts of the closure and identify alternative financial services in the event of closure; and
implement and fully fund transition arrangements and ongoing support services which ensure access to cash and essential banking services following a closure.
The committee recommends that the regulator would assess compliance with the Code before any closure is agreed to.
In enforcing the mandatory Banking Code outlined in Recommendation 3, the committee recommends that the regulator be authorised to approve or defer any closure request. In deferring a closure, the regulator would be authorised to direct a bank to take certain reasonable actions, including to order further consultation or provide additional information to the regulator.
The regulator should be provided with a range of penalties should a bank fail to comply with an order to defer closure, or with any other undertaking.
The committee recommends that the Australian Government commission the Australian Competition and Consumer Commission to explore the barriers to customers switching banks, with a view to allowing those that open and/or maintain branches in regional, rural and remote towns to attract more business.
The committee recommends the Australian Government establish the Regional Community Banking Branch Program (RCBBP). The objective of the RCBBP would be to help underwrite the establishment of ‘community bank' branches providing in-person banking services in regional, rural and remote Australia. Local communities would be required to raise their own capital as well, but the government contributions could help lower the required amounts. Consideration could also be given to using this fund to help enhance financial services available at Australia Post.
To support the RCBBP, the committee recommends that the Australian Government establish a supplement to the Major Banks Levy to be levied on the major banks. Funds raised by the supplement must be hypothecated to provide funding to the RCBBP.
The committee recommends that the Australian Government works closely with the banks and Australia Post, to require all major banks to have agreements with Bank@Post and to harmonise the terms of Bank@Post agreements to improve fairness and sustainability. Specifically, agreements should include increased deposit limits to support small businesses, provisions to facilitate identification verification, and to handle issues around temporary account closures or multiple signatory requirements.
Major banks that do not put in place agreements with Bank@Post to deliver financial services should pay an increased supplementary levy as described in Recommendation 6.
The committee recommends that the Australian Competition and Consumer Commission consider measures to protect access to personal and business banking services in regional, rural and remote locations. This may include, but not be limited to, proposing an authorisation to circumvent anti‑competitive laws such that banks can cooperate for the purposes of reducing the impacts of bank branch closures on regional communities.
Full analysis to come.
Download the report
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