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NSW SMALL BUSINESS MINISTER SANDRA NORI MISLEADS THE PUBLIC ON BANK FEES PAID BY THE SMALL BUSINESS SECTOR
Sydney, 2 July, 2002: The Australian Bankers’ Association (ABA) says the New South Wales Minister for Small Business, Sandra Nori, continues to mislead the public on bank fees paid by the small business banking sector.
David Bell, Chief Executive of the ABA, said claims by the NSW Small Business Minister that small businesses are subsidising big business are grossly inaccurate.
“Fees paid by small business are on a “user pays” basis – cross subsidies have been largely unwound which is fairer for all bank customers including small business.”
“Ms Nori fails to acknowledge that the fall in interest rate margins has more than offset any increase in fees for the small business sector which result in significant savings on interest repayments.”
“For an individual small business, the interest rate margin savings on a $100,000 overdraft written in 2001 compared to 1997 are $1,530. The sector as a whole is saving around $630 million dollars a year on variable rate loans because competition is squeezing interest rate margins.” (see source below).
“RBA data released last week showed that fees collected by banks from small business did increase to $2.6 billion but there was an accompanying large increase in the volume of business transacted by small business with their banks. Also, small business make up 96% of the Australian business sector so you would expect them to pay a significant proportion of fees compared to big business.”
“While there have been branch closures, Ms Nori fails to acknowledge to vast increase in banking services available to small business including including ATMs, EFTPOS, telephone banking, Internet, agency arrangements and Australia Post’s GiroPost facilities.”
“Ms Nori and her Small Business Banking Issues Paper, and authored by the Financial Services Consumer Policy Centre (April 2002) refuses to acknowledge the facts that the RBA data makes crystal clear - overall banking is cheaper than ever before.”
As the RBA recently noted “…at an aggregate level, the reduction in interest margins has significantly outweighed the rise in fees.” (RBA Bulletin, July 2001)
Mr Bell said the facts show that an inquiry by the Australian Competition and Consumer Commission is unnecessary and a waste of taxpayers money.
The ABA has given Ms Nori the facts, but Mr Bell said she continues to selectively report banking statistics which paint only part of the picture.
The Small Business Banking Issues Paper by the Financial Services Consumer Policy Centre (FSCPC) circulated for the last Ministerial Council meeting was deficient in a number of respects including incorrect and incomplete information.
The ABA analysis of the FSCPC has been provided to all Small Business Ministers, State and Federal, so MPs can base their decisions on the facts, rather than poor information.
Background for editors on the competitive small business banking market:
· There are:
(source: Cannex)
· Interest margins on small business variable loans have declined by 2.14 percentage points since 1995 to 3.27 percentage points in 2001. The value of those savings in 2001 was approximately $630 million on variable rate loans to the small business banking sector. (Source RBA)
· Small business acceptance of credit card transactions is growing in popularity as there was a 23% increase in transactions acquired from merchants. (source RBA)
· Based on RBA data and their assumptions, the ABA estimates that the interest rate margins on variable rate loans outstanding to small business have decreased by 1.9 percentage points from 1995 to 2001. Small business variable rate loans outstanding averaged $33,113 million over 2001. Therefore the savings for the small business sector from the reduction in margins on variable rate loans was worth approximately $633 million. Noting that variable rate loans are about half of total lending to small business, these savings have offset the increase in 2001 in total fees collected by banks form small business by approximately $223 million.
· The KPMG report “Small Business Banking in Australia” can be down loaded from the ABA site – www.bankers.asn.au
For further information contact:
Heather Wellard
Australian Bankers’ Association
Phone: 02 8298 0411
Mobile: 0409 830 439
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