Labor has a chance to fulfil Banking Inquiry recommendations

With the Senate inquiry into Bank Closures in Regional Australia delivering its final recommendations, the Albanese Government now has the task of intervening to prevent further closures.

This article concludes Dale Webster's series on the outcome of the Banking Inquiry. Read part one here and part two here.

Transferring risk

Access to money, or lack of it, sits at the core of human well-being and because of this, banks are often the places where things can turn nasty.

Robberies are top of mind when it comes to risk due to the amount of cash being held on premises and although they appear to happen less than they did in the 1980-90s due to better security acting as a deterrent, they are still a very real threat.

In Victoria, for example, there have been six violent robberies/burglaries at a bank each year on average for the past ten years according to the state’s Crime Statistics Agency.

Add in violent assaults, firearm and weapon offences, threatening behaviour, conduct endangering life, riot and affray and terrorism, and the number of violent incidents bank staff have had to deal with each year since 2014 hits 75.

Banking Inquiry delivers a win for regional customers

The Senate Inquiry into regional bank closures handed down its final report, urging government action to curb the banking sector's abuse of power.

Looking at all crime – a large part of which is deception offences that bank staff receive specialised training to identify – every single bank in Victoria would have had to call the police twice a day, every day for the past decade.

Guns, knives, angry people, family violence, deceit, even arson — this is what the big four banks have handballed to post office owners.

And these people – usually just a person or couple running a small business on their own – must manage the risk of being the closest thing to a town’s only bank without the benefit of a building designed for banking, security screens, duress alarms, armed guards or a vault.

Many sleep in the same premises where the money is being kept.

When questioned at the Senate Inquiry into regional bank closures about how much they pay Australia Post to be their representative in a community, the three major banks who do offer Bank@Post would not disclose the amounts, but it is widely understood to be between $10-$20 million per year each.

If Australia Post did share this with its licensees (it doesn’t) it would put the daily contribution to the 3,500 post offices that act as their proxies at between $8 and $16 per day per post office.

Not a lot to mitigate the increased risk of having a sawn-off shotgun pointed at you.

General arrogance

Could one last display of arrogance have been what finally brought the banks unstuck?

On 10 February 2023, two days after the motion for an inquiry into regional bank closures passed through the Senate, the committee responsible wrote to all banks “respectfully” asking that they postpone any further closures until the conclusion of the Inquiry.

While all other banks agreed to this at least in part, the answer from National Australia Bank (NAB) was a categorical no and it went on to close 53 regional branches, or nearly 20 per cent of its regional network, before the final report was delivered.

Inquiry finds banks playing a dangerous game

The Senate Inquiry into regional bank closures determined that greed resulted in banks not only posing dangers to customers but the environment as well.

It was a bold move its chief executive would have been aware had the potential to upset the senators but history might explain why the bank was willing to gamble with such high stakes: it had done it before and got away with it, closing at least 69 branches between the first two regional bank closure Inquiries in 1999 and 2004.

Forty-three of these were while the second Inquiry was being conducted.

While the other major banks were not as brazen as NAB, they still tinkered around the edges of the moratorium.

Westpac was caught withholding information from media resulting in it being reported that the bank was honouring the moratorium agreement in full when it was, in fact, still going ahead with more than half the closures it had planned, including branches in Coober Pedy and Carnamah that would be left with no banks at all.

ANZ also proceeded with 14 closures, leaving Smithton in Tasmania without a bank, and the Commonwealth Bank chose not to extend the agreement to its Bankwest brand, turning what was once Western Australia’s regional bank for farmers entirely digital and closing 19 regional branches.

Both Westpac and the Commonwealth closed branches in regional coastal areas and larger regional cities, arguing that they were exempt from the moratorium due to population density classifications used by the banking regulator.

They may well have had a loophole to exploit but when it comes to perception, a miss is as good as a mile.

Why win a battle if it’s going to cost you the war?

The final report

The Senate inquiry into Bank Closures in Regional Australia officially came to an end just after noon on 24 May 2024, with the tabling of the final report.

In their own words, the senators found the following:

Committee view

Bank branch closures are devasting to many regional and remote communities.

It is clear that the current model of banking industry self-regulation has failed to shelter regional Australia from the damaging impacts...

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 frustration felt by those in affected communities, including branch staff, is exacerbated by the banks' disrespectful treatment and failure to meaningfully engage with communities, customers, and staff alike.

Despite their evidence that they do not “take these decisions lightly”, banks are clearly failing to comprehend and take responsibility for the impact of closures on communities.

Branch closure impact assessments – now provided by banks as an outcome of the Regional Banking Taskforce – represent a disappointing, “tick-a-box” exercise, and are an inadequate reflection of the impacts of closures on communities. The committee believes that many of these so-called “assessments” are being prepared after a decision has been taken or announced, and in some cases, after the branch has closed.

There is nothing in Australia's existing regulatory architecture that could stop, or even slow the pace, of branch closures, and there is no regulator that routinely deals with these concerns.

Under their current Code of Practice, banks have no obligation to provide face-to-face services if they do not consider it “financially viable” to do so — even for their elderly, disabled or vulnerable customers. Banks can, and do, walk away from communities they have served for decades, with little warning and no consultation.

This is unacceptable.

Banks enjoy a unique position within the Australian economy, with deposits guaranteed by the taxpayer to protect against potential bank failures. They also enjoy access to capital at a discounted rate compared with other entities and citizens. These benefits engender commensurate responsibilities to the community.

Without regulatory intervention, banks will continue to close branches and communities will pay the price.

The forces behind Australia's regional bank closures

The refusal of major banks to answer questions on the closure of regional branches has called into question the legitimacy of the think tanks that team up with them, Dale Webster writes.

The eight recommendations from the Bank Closures in Regional Australia Senate inquiry (2024) are as follows:

Recommendation 1

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.

Recommendation 2

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.

Recommendation 3

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.

Recommendation 4

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.

Recommendation 5

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.

Recommendation 6

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.

Recommendation 7

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.

Recommendation 8

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.

Meet the man who single-handedly destroyed NAB's reputation

After slashing National Australia Bank's regional branches by a third, CEO Ross McEwan is bailing before a senate inquiry into the closure reports.

Finishing the job

The magnitude of these recommendations will have come as a shock to the major banks, indicated by an almost complete halt to regional bank closures since the report was handed down.

Even NAB, which closed nearly one branch a week for 15 months while the Inquiry was on, has not announced one closure since the report was released.

There is no doubt banking industry representatives will now be madly working with their government and friendly media contacts in an attempt to discredit the report, which is due to be responded to by the Government by 24 August.

That task will fall to the Minister for Financial Services, Stephen Jones, who sadly has shown no engagement on the issue and was responsible for the disastrous final report from the Regional Banking Taskforce being slipped out at 4:52 PM on Friday evening before a long weekend.

Regional Australia should instead be looking to the Prime Minister to show leadership on this given that, as a member of the 1999 Inquiry Committee, he knows what it feels like to have his hard work on this issue sabotaged by political interference.

Mr Albanese needs to be reminded that more than two decades ago he, like these senators, was part of a team that also heard the stories from people who were drowning under the weight of bank closures and tried to assist them.

And it was his party, Labor, that four years later issued a very clear ultimatum to the banks that unless they started taking their community service obligations seriously the industry would be re-regulated.

Labor lost one of its own during this Inquiry with the passing of Senator Linda White, who left her Melbourne base and travelled to some of the remotest hearings to make sure she properly understood the job she had been tasked to do.

Her comments during the questioning of the bank executives showed she had quickly grasped that government intervention was the only way to bring them to heel.

This is Mr Albanese’s chance to finish the job Labor started two decades ago by directing his Minister to accept all recommendations from this historic inquiry in full.

Like the senators who put their names to the final report, he cannot morally turn his back and let this sort of behaviour continue any longer.

UPDATE: Since this story was published it has been revealed that ANZ will be closing its Murwillumbah branch.

Dale Webster is an inaugural recipient of a Walkley Foundation Grant for Freelance Journalism on Regional Australia. This article was originally published on The Regional and has been republished with permission. You can follow Dale on Twitter @TheRegional_au.