Government explores public bank solution

After numerous bank branches shut down in recent years, a parliamentary investigation has released its final recommendations.

There is a growing call for the government to look into establishing a publicly owned bank. The aim is to address the issue of limited access to financial services for regional and remote Australians, especially with the increasing closure of bank branches. After conducting an investigation into the impact of branch closures on consumers and businesses, a Senate committee suggested in its conclusive report on Friday that the current Banking Code of Conduct should become mandatory.

According to the regulations, banks will need to engage in thorough consultation with communities prior to closing a branch. Additionally, they will be responsible for funding the transition and ongoing services to ensure continued access to cash and essential banking services in the event of closure. In order to ensure compliance with the required regulations, a regulatory body would possess the power to grant or delay closure requests, with banks facing penalties if they fail to meet consultation or disclosure obligations.

In addition, the committee suggested that the Australian Competition and Consumer Commission should be responsible for investigating the obstacles that customers encounter when changing banks. The enquiry’s final report suggested that the government should support the establishment of community bank branches. The report suggested supplementing the cost of setting up these branches by increasing the Major Banks Levy.

Bank@Post expansion proposal

The committee’s final report also suggested an increase in the Bank@Post service, which would require ANZ to participate. Customers at Commonwealth Bank, Westpac, NAB, and several smaller banks can already utilise Australia Post’s extensive branch network for basic banking services, including cash withdrawals and deposits. These services are available through individual deals totalling $90 million.

Although ANZ has not provided its services through Bank@Post since 2019, its chief executive, Shayne Elliott, has expressed a willingness to reconsider after the completion of the merger with Suncorp. Although the committee did not propose the immediate establishment of a state-owned bank, it did suggest conducting a feasibility study to explore this possibility, potentially in collaboration with the existing Bank@Post model.

However, Anna Bligh, the chief executive of the Australian Banking Association (ABA), expressed caution about the idea of a publicly owned bank.

“Given the past catastrophic failures of state-owned banks in this country, Australians should be wary of suggestions of a new taxpayer funded government-owned bank,” Ms Bligh said.

“A large government-owned bank would put the ongoing viability of the many small and medium sized banks that serve customers in regional and rural Australia at serious risk.”

The dramatic collapse of state-run banks in Victoria and South Australia in the early 1990s was a significant economic crisis in Australia’s recent past, resulting in the downfall of two state Labour governments.

The closure of branches in regional towns has raised concerns about the major banks’ commitment to acting in good faith, according to committee chair and Queensland Nationals senator Matt Canavan. There now needs to be a stricter and more proactive approach to rebuild financial services in the bush,” Canvan said.

“The major banks have been the principal reason why there is a financial desert in so many country towns and so it is perfectly reasonable for them to pay a small fee to help rebuild financial services in the bush.”

The enquiry held hearings in various regional centres, such as Cloncurry, Tom Price, and Launceston. Witnesses emphasised the importance of bank branches in these communities, especially for the elderly and individuals with limited internet access or financial knowledge. Companies operating in rural and isolated locations frequently find themselves having to travel long distances to deposit cash due to the lack of secure facilities to store their substantial cash reserves.

Last year, S&P Global Market Intelligence data revealed that Westpac closed a total of 167 branches. Commonwealth Bank, ANZ, and NAB all closed a significant number of branches. These statistics encompass urban, suburban, and rural regions. Recent data released by the ABA reveals a significant shift in consumer behaviour towards online banking. An overwhelming majority of transactions—98.9 percent, to be precise—are now conducted through the internet or banking apps.

Physical branches handle an additional 0.7 percent of transactions, with phone and chatbox functions handling the remaining 0.4 percent. Similarly, an increase in digital wallet transactions and a decrease in cash usage have led to a decrease in branch visits. Only 12 percent of consumers now report making weekly visits to their local bank.

CBA and Westpac have announced that they will not be closing any branches until December 2026 and January 2027, respectively. ANZ has decided to temporarily halt closures until the investigation is complete, while NAB has chosen to proceed with shutting down regional locations.