The ABA is responding to media reports based on statements from the Finance Sector Union, Senator Nick Xenophon and Senator Steve Fielding.

David Bell, Chief Executive of the ABA, said: "Confidentiality of customer information is at the core of a successful banking operation. The ABA is confident that banks take appropriate measures to protect customer information, regardless of whether or not some processing functions are undertaken offshore or whether they are all done in Australia."

“It is up to individual banks as to how they manage their systems and data, but it is important to recognise that banks not only have a legal obligation to secure personal information that they collect from their customers but that they also have a very strong commercial incentive to ensure customer information is properly protected.”

Mr Bell said the union and Senators demand that customers provide written permission before information is sent overseas is impractical and unnecessary.

Customers already provide consent on how their personal data can be disclosed by a bank. This is an existing requirement under the law.

Mr Bell said: “Requiring a more explicit transaction-by-transaction customer consent will increase paperwork for bank customers and indeed bank staff, ultimately slowing down the banking process and increasing costs.”

“Also, customers are now deluged with huge amounts of information, which is legally required, and paperwork when opening a bank account or buying financial products or services. Do they really want more paperwork? Unlikely.”

The ABA said it was surprising that Senator Xenophon’s comments were confined to banks, because many other companies offshore customer-related services to third parties.