Thursday, November 25, 2010

Major banks face $2bn hit from reform plans

THE major Australian banks could face an earnings hit of up to $2 billion a year. 
This, as a Greens proposal to scrap transaction fees and autoteller charges gathers support from crossbench members of parliament.

The Greens have proposed the banks be forced to provide fee-free transaction accounts and cap standard variable interest changes to Reserve Bank cash rate movements for the next two years.

The proposed legislation, introduced by Greens MP Adam Bandt, is gaining momentum after it was yesterday backed by independents Andrew Wilkie, Tony Windsor, Rob Oakeshott and Bob Katter, and WA Nationals MP Tony Crook.

The crossbench support for the Greens plan was interpreted by many in the industry as an indication the group could back opposition treasury spokesman Joe Hockey's call for an independent inquiry into the banking sector.

It is likely the crossbench MPs will demand the Hockey inquiry examine its proposals in return for their initial support.

Mr Wilkie said there was a need to break down the big four's domination of the banking sector.

"At the moment the big four banks are acting absolutely outrageously . . . and the public interest has been lost in this," Mr Wilkie said.

The plans to stop the banks charging up to $2 for non-customers using their autoteller networks, and changes to transaction account fee structures, could be a major earnings sting for the top four institutions. The autoteller moves would not apply to independent operators, only the banks.

The Reserve Bank estimates that transaction fees earned the banks $1.63bn last year, the most recent figures available. Industry observers said the autoteller fees would be worth at least $400m.

The possible changes come on top of fees already abolished by the banks in the past year, worth nearly $1bn.

The major banks have had discussions with the Greens in the past month to argue against the legislation's proposed changes.

The gathering support could put pressure on the government, which is due to reveal its banking reform package within weeks.

Australian Bankers Association chief executive Steven Munchenberg said there was a risk the banks could remove autotellers from underused locations, which were generally rural and regional centres.

"I would be very concerned if the Greens' proposals were achieved," he said. "It could result in many ATMs in some areas becoming uncommercial, and there would be a danger that the banks would not expand their networks in some areas . . .

"If that was to happen, there would be the option for the other half of the industry (independent ATM networks) that would not be regulated under this legislation to provide their services at a much higher cost."

National Australia Bank chief executive Cameron Clyne is expected to respond to the political scrutiny of the banks in a speech today in Sydney.

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