BANK FEE ANALYSIS SHOWS NET GAIN Sydney, 20 July, 2001: The Australian Bankers' Association (ABA) today rejected claims that bank fees were increasing at rates beyond growth in the industry, saying that increased competition in the sector was clearly delivering gains to customers, and yesterday's release of Reserve Bank of Australia (RBA) data on bank fees and income confirmed this. Australian Bankers' Association CEO, David Bell, criticised claims that most bank customers were paying more for their banking services. Mr Bell said: "The selective interpretations of the RBA data completely misrepresent the facts. The facts are that most bank customers are paying less for bank services overall as the reduction in margins more than offsets fee increases. "The RBA report shows that as a percentage of assets, fee income has risen by 0.1%, while the percentage fall in interest margins is 0.75%, since 1997. "Even more crucial is the data that shows banks are lowering their cost base to accommodate lower margins, not increasing fees. "Housing and small business borrowers are big winners from increased price competition, with fees for small business loans declining by 5 per cent. "The public debate on bank fees continues to ignore the facts. The data from the RBA shows that price competition is having a profound effect on banking operations, with a move away from subsidisation of most bank products. "The banks are actively, as a result, lowering their cost base, and not recovering margin fall in fees," he said. The key findings of the RBA report include: Fee income as a proportion of assets has been virtually constant since 1997, rising by only 0.1 of a percentage point At an aggregate level income earned from banking services as a percent of average assets continues to trend down reflecting a lower per unit costs of Australian banking services Bank fee income as a proportion of total income has increased as a result of interest income falling, not because fee income has increased. The increase in fee income as a percentage of assets by less than 0.1 of a percentage point since 1997 is considerably offset by a decline of 0.75 of percentage point in the interest spread. The RBA information indicates that small business fees per loans outstanding have been falling. When combined with the fall in interest margins, this has lead to a clear fall in the cost of financial services to Australian small business The area where the largest increase in fee income has occurred is transaction fees. RBA notes that most banks waive account keeping and transaction fees for customers whose home loan is with the bank, and most also provide exemptions for certain groups. Concessions are also granted to people with a disability and to customers in rural locations who are unable to use ATM facilities, with these customers typically charged reduced rates for over counter transactions. In addition several banks have recently announced the introduction of new arrangements for low cost bank accounts of social security recipients. Mr Bell said the banking industry has moved to address key community concerns about the affordability of banking services by offering safety net, basic bank accounts that are available to almost five million Australians, who are holders of Commonwealth Government health concession cards.* The ABA benchmark features of the safety net, basic bank accounts are: no account keeping fees; six free non-deposit transactions per month including up to three free over-the-counter withdrawals per month; no minimum monthly balance required; unlimited free deposits. Mr Bell said: "Some of our member banks already have announced bank accounts that far exceed these minimum standards. "The industry understands that the impact of many rapid changes in almost every aspect of the way government and business services are delivered had become a cause for concern for many in the community, however, focusing in on the issue of bank fees without acknowledging the broader changes was not accurate nor helpful to the debate", he said. * Commonwealth Government Health Care Card, Commonwealth Government Seniors' Card, Commonwealth Government Pensioner Concession Card For Further Information Contact:   Heather Wellard ABA PR Phone: 02 8298 0411 Mobile: 0409 830 439   ENDS