17 February 2023
ABA CEO Anna Bligh spoke to ABC News on Afternoon Briefing with Matt Doran
MATT DORAN: Staying with matters relating to banks and the nation’s largest financial institutions have been put on notice with a new Senate inquiry taking a look at the impact closing regional bank branches and removing ATMs is having on communities. Over a four year period from 2017 to 2021, the banking regulator says there’s been a 23% decline in the number of branches in regional areas. That means that in more remote corners of the country, people might be hundreds of kilometres away from their nearest branch. Anna Bligh is the chief executive of the Australian Banking Association. And she joined me a short time ago from Sydney. Anna Bligh, welcome back to afternoon briefing, we’ve had an announcement from a couple of the big banks this week that they are suspending the closure of regional branches and regional ATMs pending the outcome of this new parliamentary inquiry into the regional banking system – is that just delaying the inevitable?
ANNA BLIGH: Well, as you will be aware, the National Party has moved to establish a Senate inquiry into bank branch closures in regional Australia, they did write to the CEOs of the four major banks and one of the regional banks, asking them to suspend any planned closures for the duration of that committee. Two of the major banks have said they will, one has said they won’t, they’ll be going ahead with their programme. Obviously, their commercial decisions for banks. I can’t really speculate on these individual branches. But what I can say is that, these are happening because Australians, in their droves are changing the way that they bank, they are jumping into the digital space, at a pace unprecedented and banks are doing their best to make sure that the people who are in the digital space, that they’re funding what they need to fund their to keep them safe, and to keep all of those products up to speed, as well as funding Australia Post, when they do have to close the branch to maintain banking services in those towns. So on those particular branches, I think we’ll have to wait and see Matt,
“Whether you’re in a remote part of the country, or in the middle of a capital city, the data shows us that if you have reliable internet, then people are choosing to bank and do their basic transactions online”Anna Bligh, ABA CEO
MATT DORAN: On that issue of people flocking in their droves, I think was the phrase that you use to online banking. Do you think therefore that when we do hear so much about regional bank branches closing and the it seems like almost a cacophony coming from those local communities about why they want those branches to remain open? Are you suggesting that that’s maybe out of touch with what the locals are really experiencing that they are moving online as a sort of vocal minority?
ANNA BLIGH: Well, it doesn’t matter where you live in Australia, whether you’re in a remote part of the country, or in the middle of a capital city, the data shows us that if you have reliable internet, then people are choosing to bank and do their basic transactions online. Of course, for some trends, for some services, you know, a big decision like taking out a mortgage, people are likely to seek out a branch because they want a face to face discussion. Although, as many as 60% of mortgages in some banks are now being written on a platform like zoom or team. So it’s not just apps and using your, your computer for on internet banking, it’s also using other platforms to be talking face to face with a banker. We know that 97% of all transactions are now being done digitally. But there are still many Australians and banks understand this, who either are unable or because it’s too complicated or perhaps they don’t have reliable internet, if they live in a very remote part of the country, for whom the banks are absolutely clear, they don’t want to leave those people behind. Australia Post is funded by Australia’s banks and other financial institutions to provide basic banking services, and all of those towns where branches are closing all have a post office or a postal outlet. So it is about change, though. And this is a big change for someone who maybe has banked in the same branch, using a passport for 50 or 60 or 70 years of their adult life. So change is never easy. And I think there’s also when people see something close in their town, whether it’s the bank or whether it’s, you know, a school in their area, it can often feel quite emotional about what the future of your town might be. Banking services are still in town, but they’re coming out of the post office. And for some people, that’s a change that they feel very uncomfortable about.
MATT DORAN: How do you respond to the criticism that’s often levelled at the banking sector that it’s a bitter pill to swallow when you’re seeing these branches close or ATMs being moved? At the same time that banks are recording huge multibillion dollar profits, what’s your response to that sort of criticism?
ANNA BLIGH: Well, firstly, I’d say that, we need to understand what happens with bank profits, they’re big numbers, you’re right but 80% of those profits go back to Australian shareholders, many of whom are self funded retirees, mums and dads relying on the dividends from those profits. And the other big shareholders are Australian superannuation funds. So When banks make profits, they go back into the superannuation and retirement incomes of every working Australian. So I don’t think we should wish those profits away too quickly. And it’s those profits that allowed banks for example, to support Australians and their and their families during COVID. So the banks took a drop in profit, then. Now there are different times, but strong, stable, profitable banks and the Reserve Governor said this again, today, a very important to the Australian economy. But I think the other thing, people often think that when a branch is closed, somehow the bank has saved a lot of money. What’s actually happening is the bank is taking money from bricks and mortar banking, and putting it into digital banking, as more Australians are banking digitally and using those sorts of services, banks have to spend more and more and more money on the technology required to keep them safe to keep the bank free from cyber attacks and to continue to improve the service from those sorts of channels, make them faster, make them safer, make them more convenient. That’s what customers want and you need to invest in that to do that. In fact, the the spending on I.T. from banks in the last 10 years has, it’s now more than it used to be in 2010, about the same as they were spending on bricks and mortar, it’s now more than double what they’re spending. There’s still a very big branch network, there’s still more than 4000 branches across the country, and more than 3000 post offices. So for a country our size, it’s still a very big footprint. But it is going to look different in the years to come.
“We need to understand what happens with bank profits, they’re big numbers, you’re right but 80% of those profits go back to Australian shareholders, many of whom are self funded retirees, mums and dads relying on the dividends from those profits”Anna Bligh, ABA CEO
MATT DORAN: You mentioned there, Philip Lowe, he’s had the unique privilege of providing evidence to a parliamentary committees twice this week. Something else he said about the banking sector was that he is concerned to see the banks pass on interest rate hikes for mortgages and the like very, very quickly, but not doing so for their their savings accounts for people who’ve got money sitting in the bank hoping that it’s going to grow. As a result. Why are banks very quick to pull one lever and seemingly reluctant to pull the other?
ANNA BLIGH: Well, the treasurer has asked the ACCC to conduct an investigation into the pace and nature of the passing on of those interest rate lifts to savers. So I think when we’ve seen that report, and I don’t really want to preempt it, because they have the powers to do this thoroughly. I think to be able to look right across the sector, you really do need the investigators the powers that the ACCC will use. But I should say, what’s perhaps often not understood is between when rate increases, announced, and when it actually hits someone’s mortgage, there’s a lag time of about three months. So many people are still only paying the interest rate that was announced in October, because there’s still three months to go from that, etc, or from November. So there’s actually a three month average lag time between when an interest rate on your mortgage announcement and its implementation. But for savers, on average, it’s, it’s about a couple of weeks. So the lag time there is literally a week or two weeks. I think it’s more about the pace, when the increases started is probably one of the issues that the governor might be talking about and that’s something the ACCC will look into and we’ll all get a much clearer picture.
MATT DORAN: But does it take an investigation from the ACCC to cast a light on that? Shouldn’t the banks be constantly reviewing these sorts of things themselves? And indeed, explaining to their customers why they don’t deserve to have those interest rates passed on on savings accounts so quickly?
ANNA BLIGH: Well, as I said, they passed on within a fortnight generally. And if you have a look at the savings rates on the same on similar products, in February last year, there was not a major bank offering more than 0.3% on a term deposit. They’re not there’s now not a major bank offering less than 4%. So going from 0.3 to four, there’s there has actually been a pretty significant increase in the savings rate. Now, what the ACCC will look at is how early did that happen? Is it enough? You know, these are judgments that I think you’d rely on the on the regulator to be making.
MATT DORAN: I’m sure many people will be looking at that investigation with considerable interest, Anna Bligh thank you for joining us an afternoon briefing
ANNA BLIGH: Thank you Matt
“This is about engaging with the entire banking ecosystem in order to ensure the accessibility of the sector’s services are best serving our diverse community now, and into the future.”
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