NATIONAL AFFAIRS: by Peter WestmoreNews Weekly
DonÂ’t bank on the banks
, November 18, 2000
A ustraliaâ€™s big four banks - the National, Commonwealth, ANZ and Westpac - have just announced record profits of over $8 billion, while community concern about their operations has never been higher. Concerns about the operations have centred on four issues: widespread branch closures (particularly in country areas), slashing the size of the workforce, high fees for all banking services (particularly face-to-face banking with a teller), and a relentless drive towards "efficiency" at the expense of customer service.
Community concern has also been accelerated by bank executivesâ€™ comments that they supported the abandonment of the "Four Pillars" policy, which prevents foreign takeovers of, or amalgamation among, the four largest Australian banks.
The Federal Treasurer - who himself seemed to be equivocating on the issue last year - reaffirmed the "Four Pillars" policy in the light of widespread public opposition to the move.
Statistics compiled from the four banksâ€™ annual reports confirm that their focus is narrowly driven by profit.
In its last financial year, the largest bank, the National, closed 135 branches, while Westpac closed 118, the Commonwealth 88 and ANZ 13.
Branch closures have, to some extent, been offset by the opening of eft-pos facilities in many supermarkets, as well as telephone and Internet banking. But for many people, there is no substitute for the local bank branch.
For businesses, the local bank branch is the means of depositing cash on a daily basis, or obtaining cash for business transactions. And for many customers, the local bank branch is the essential link with their savings, as well as a means of ready access to bank statements, cash, loans and financial advice.
What the banks have done through eft-pos, telephone and Internet banking is to transfer responsibility for banking decisions to customers, although many people still want the bank to perform that role.
In many country areas, the closure of bank branches has destroyed retail businesses in small towns, contributing to the exodus of people from rural Australia into larger country centres or the cities.
A further point of concern is that the banks keep raising fees for conducting financial transactions, at a time of record profits.
Bank customers now face a bewildering array of charges: from account keeping fees, cheque use fees, statement fees, charges on ATM (automatic teller machine) and eft-pos transactions, credit and debit card fees, and more - and all of them are going up.
A recent study by the Sydney Morning Herald found that bank charges in Australia are among the highest in the world.
In contrast, British banks impose no charges for personal accounts which are in credit, French bank customers have free cheques, make unlimited free eft-pos and ATM withdrawals and do not pay administrative fees, while German bank customers charge only a monthly fee to cover all transactions.
Between them, the "big four" banks have also cut jobs by around 6,000 in the 1999-2000 financial year - bringing the total number of jobs lost by the "big four" since 1993 to around 40,000. (Financial Review, October 23, 2000)
And senior executives of the banks made clear that the trend is to continue. David Morgan of Westpac indicated that the use of branch banking was falling rapidly, and to accelerate that fall, Westpac would use a combination of financial incentives and education, as well as increased fees for branch transactions. (Melbourne Age, November 4, 2000)
The head of the National Bankâ€™s Financial Services Division, Mike Pratt, recently sent a memo to staff saying that it would cut a further 100 branches, causing a potential loss of 1000 employees, according to the Finance Sector Union.
At the Commonwealth Bankâ€™s annual shareholdersâ€™ meeting, held in Melbourne on October 26, CEO David Murray defended the bankâ€™s fee structure from hostile shareholders, saying that increased fees compensated for the narrowing of interest rate margins.
Despite (or perhaps because of) the cutback in face-to-face services, the banksâ€™ fee income has soared to about $7.5 billion in the last financial year, making up the lionâ€™s share of the four banksâ€™ combined $8.5 billion profits.
In light of this, the banksâ€™ claims that they are listening to their customers, as Westpacâ€™s David Morgan and National Bank Managing Director, Frank Cicutto, claimed recently, sounds a little hollow.
The focus of the banksâ€™ activities over the the next year is further "efficiency", by which they mean shedding labour, closing bank branches, and where possible, expanding their financial operations off-shore.
The Commonwealth Bank plans to expand its overseas operations, aiming to earn about 25 per cent of its revenue outside Australia, while the National Bank is considering listing on the London Stock Exchange.
What is clear is that the banks are pursuing corporate profits ahead of the interests of their employees and the public.
What is urgently needed in Australia is legislation, as exists in France, obliging the banks to provide basic banking services, for savings and cheque accounts, at no cost to their customers.
If this were done, it would have the effect of both discouraging foreign takeovers of Australiaâ€™s banks, and placing a ceiling on charges for other banking services in Australia.