Sydney, 20 June, 2004: Commenting on the release of the Australian Labor Party’s Banking Policy released today, the Australian Bankers’ Association (ABA) said that the proposed policy statement fails to recognise fully, the considerable progress that has been made by the banking industry over the past few years, and that a number of the policies may disadvantage bank customers, and the community, if implemented.
ABA Chairman, Mr John McFarlane, commented: “Banking policy has practical customer and community implications that require serious discussion and agreement before they can be implemented. Over the past few years, the industry has recognised its broader responsibilities, and has implemented a number of initiatives that have responded to those issues that Labor has identified.”
“The ABA is particularly disappointed that the statement was issued without adequate consultation with the banking industry, despite commitments by the ALP that it would consult prior to publication”, Mr McFarlane said.
There needs to be considerable effort in working through the complexities and implications of the policies, particularly in relation to initiatives that will impact on the competitive operation of product markets.
Our starting point is recognition that:
1. Australia has a very sound and internationally respected banking system – Alan Greenspan[i] cited Australia’s sound banking system as evidence of why the Australian economy avoided the Asian Financial Crisis;
2. Housing and credit card default rates are low[ii], indicating that banks are being responsible in their lending policies and the economy is strong;
3. The banks have best practice basic bank accounts for those eligible low-income customers i.e. those with concession Health Care Cards (five million Australians);
4. Bank fees and charges in Australia are no higher than fees in other larger developed economies. Bank margins have systematically declined over the past decade, and continue to do so;
5. Well over half Australian bank customers do not pay bank fees, and low-income people are protected from fees by a wide selection of low-cost, basic bank accounts. Most fees are paid by business, which are therefore tax deductible;
6. Over the past few years, Australian banks have been responsive to the communities in which they operate and have received public recognition for the work they do in the community. Most have restrictions regarding withdrawal of branches from communities;
7. Various independent government inquiries over recent decades have confirmed that direct regulation of financial institutions is the least desirable way to pursue well-intentioned social objectives.
The ABA will provide detailed comment on the ALP’s banking policy in due course.
For further information:
Heather Wellard
ABA Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
ENDS
[i] Mr Alan Greenspan, Chairman of the Board of Governors of the US Federal System, before the 1999 Financial Markets Conference of the Federal Reserve Bank of Atlanta, Sea Island, Georgia on 19 October 1999. “Australia serves as an interesting test case in the most recent Asian financial turmoil. Despite its close trade and financial ties to Asia, the Australian economy exhibited few signs of contagion from contiguous economies, arguable because Australian already had well-developed capital markets as well as a sturdy banking system”
[ii] Reserve Bank has noted: “Credit-card-arrears – a potentially useful leading indicator of financial stress in the household sector – have also fallen over the past two years, both in absolute terms and as a percentage of total balances.” Financial Stability Review, Reserve Bank of Australia, March 2004, p.10.