AN alliance of regional banks and community organisations has provided Treasury with a detailed plan to ensure the sustainability of essential face-to- face regional bank branches, amid a continued crisis of branch closures across Australia.
The Regional Banking Investment Alliance said the modest and easily implementable plan involves an industry community service obligation which, links to regional banking jobs and helps cover costs for face-to-face branch services.
The CSO initiative would be funded by the banking industry via existing financial sector levies and amount to around $153 million, or 0.17 per cent of the total operating income of the major banks. Under the proposal, smaller banks (with less than one per cent of industry assets) would be able to opt out.
Alliance spokesperson and CEO of Regional Australia Bank, David Heine said a remedy is urgently needed to stem the closure of bank branches across Australia.
“Our CSO proposal involves a direct contribution to any bank which maintains or expands regional bank branches,” Mr Heine said.
“It would ensure ongoing support to preserve the financial viability of existing branches and incentivise banks to invest in new ones.
“To be effective, the CSO must make a meaningful contribution to the running costs of a regional branch but not be so significant as to undermine market forces and competition.”
Under the RBIA proposal, bank branches receiving the CSO contribution would need to meet criteria that the community generally expects from retail branch services, such as cash handing, home loans, transaction accounts, and term deposit management, as well as trained staff to offer advice and support.
The contribution would be directly linked to trained full time employees, ensuring face-to-face services are maintained.
Some members of the RBIA have already indicated they would open new branches if the model was adopted.
“For the purposes of defining a branch for eligibility for a CSO contribution, it is essential that banks only include those branches providing trained face to face core retail services, including cash management services,” Mr Heine said.
“As trained face-to-face services are the main reason why branch services are valued and demanded by regional communities, it is essential to directly link subsidies to the number of employees in a branch.”
CEO of Traditional Credit Union, Simon Lyons, likened the alliance to “a David versus Goliath battle”. “The big four alone made more than $31 billion in profit last year, yet they’re walking away from the communities that actually helped to build their success,” Mr Lyons said.
“TCU and our RBIA partners turn up every day in places where banking is hard and costly, not because of profit, but because these communities matter, these communities need us.
“A fair CSO on banks that close branches or don’t have any branches would allow us to keep cash flowing, create real jobs, and expand services to towns that the majors have abandoned.
“It’s time to support the banks that stay, not just allow those that leave to reward their shareholders at the expense of regional and remote Australia.”
CEO of Queensland Country Bank, Aaron Newman, said regional bank branches often incur additional costs due to ‘pass through banking’, where customers use regional bank branches for costly services like cash handling and then transfer their funds to big banks who enjoy the profits.
“We help these communities with fraud and scam advice, cash withdrawals and deposits, cash floats, and provide local jobs,” Mr Newman said.
“We are passionate about servicing our local communities and keeping the profits local, but it’s really tough when we are competing against giants, who are not doing the same.
“Around 30 per cent of transactions in our banks lead to pass through banking, seriously disadvantaging our ability to compete and expand. We just want the banks who are neglecting the regions to pay their fair share in keeping face-to-face services alive,” he said.
