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Chapter 2 - Bank branch closures in rural, regional and remote Australia
2.1
There is no doubt that over the past decade
there has been a fundamental shift in the nature of banking and the way people
obtain financial advice.[1]
According to two financial commentators:
The net effect has been a transformation in the Australian
financial system from a relatively closed, oligopolistic structure in the 1950s
and 1960s, based predominantly on traditional bank intermediation, to a more
open and competitive system offering a much wider variety of services from an
array of different providers.[2]
2.2
One of the most telling signs of change in the Australian
banking industry is the decline in the number of bank branches.[3] This chapter examines
statistics on the number of bank branches in Australia and the rate of closure over recent years focusing particularly on
regional areas. It then looks at the reasons for the closures.
The trend in bank branch closures
2.3
Bank branch closures have occurred across the
nation in both metropolitan and regional areas. The period between 1993 and
2000 saw a substantial reduction in branches by the major banks. At June 1993
there were 7,064 bank branches but within eight years this number had fallen by
almost one-third to 4,789.[4]
2.4
The following table traces the steady decline in
the number of bank branches since 1993 in both metropolitan and
non-metropolitan areas.[5]
Table 2.1—Number of Bank Branches in Australia,
1990–2001[6]
Year
|
Metropolitan Branches
|
Non-metropolitan
Branches
|
Total
|
|
Branches
|
Variation
|
Branches
|
Variation
|
Branches
|
Variation
|
1990
|
4028
|
|
2893
|
|
6921
|
|
1991
|
4049
|
+ 21
|
2868
|
- 25
|
6917
|
- 4
|
1992
|
4032
|
- 17
|
2888
|
+ 20
|
6920
|
+ 3
|
1993
|
4118
|
+ 86
|
2946
|
+ 58
|
7064
|
+ 144
|
1994
|
4075
|
- 43
|
2672
|
- 274
|
6747
|
- 317
|
1995
|
3990
|
- 85
|
2665
|
- 7
|
6655
|
- 92
|
1996
|
3879
|
- 111
|
2629
|
- 36
|
6508
|
- 147
|
1997
|
3499
|
- 380
|
2622
|
- 7
|
6121
|
- 387
|
1998
|
3190
|
- 309
|
2425
|
- 197
|
5615
|
- 506
|
1999
|
3047
|
- 143
|
2311
|
- 114
|
5358
|
- 257
|
2000
|
2838
|
- 209
|
2165
|
- 146
|
5003
|
- 355
|
2001
|
|
|
|
|
4789
|
- 214
|
|
|
|
|
|
4843
|
54
|
|
|
|
|
|
4858
|
15
|
2.5
The above statistics show that the fall in the
number of branches is most significant in metropolitan areas. Even so, the loss
in non-metropolitan areas has been substantial. Of the more than 2,000 bank
branches that have closed since June 1993 well over 750 were in non-metropolitan
areas. Furthermore, the loss of full banking services as provided by a bank
branch can be felt most keenly in rural, regional and remote Australia where in some cases the closure
of a branch has left communities without a banking facility in their district.
2.6
The Committee particularly notes the escalation in branch closures in
non-metropolitan areas between 1997 and 2001. The most recent statistics on
bank branch numbers taken from APRA’s records, which cannot be compared with
the previous Reserve Bank figures because of the different nature of the
database, show a tapering off in the rate of decline. Overall, there was a gain
of 54 bank branches between 2001 and 2002 and a further increase of 15 branches
to June 2003.[7]
During this period, however, the figures show only a slight increase of 5
branches in remote and very remote areas over this two-year period.[8] Despite this improvement, the
legacy from over 750 branch closures in country Australia endures.
Table 2.2—Banks—Branch level of Service, 2001,
2002 and 2003[9]
Points of Presence Category comparing 2001, 2002 and 2003
|
Industry
|
ARIA Category
|
Branch level of service
|
Banks
|
|
2001
|
2002
|
Variation
|
2003
|
Variation
|
|
Highly Accessible
|
3289
|
3292
|
3
|
3324
|
32
|
|
Accessible
|
811
|
846
|
35
|
833
|
-13
|
|
Moderately
Accessible
|
433
|
458
|
25
|
455
|
-3
|
|
Remote
|
132
|
136
|
4
|
144
|
8
|
|
Very Remote
|
103
|
104
|
1
|
102
|
-2
|
|
(blank)
|
11
|
7
|
-4
|
0
|
-7
|
|
Total
|
4789
|
4843
|
54
|
4858
|
15
|
2.7
Although the available statistics show the
declining number of bank branches, they do not give an indication of the number
of communities that are without a local bank branch. The National Farmers
Federation (NFF) estimated in 1998 that there were around 600 communities in
rural and regional Australia without financial institutions. Statistics
presented by Dr John Taylor, the Australian National University, suggest that
the number of communities without access to a banking facility is higher. He
noted that there are 854 discrete communities of Indigenous Australians with a
population fewer than 500 that do not have a store or an administrative
building where facilities such as EFTPOS and ATMs could be housed.[10]
The influence of globalisation on the banking industry
2.8
People associated with the industry attribute
the decline in bank branches to four major factors—public policy reforms especially
financial deregulation; technological progress; changes in consumer demand; and
demographic movements that have taken place over the last two decades.[11] Before considering these
factors, the Committee discusses the influence of the global marketplace on
Australian businesses.
2.9
Globalisation refers to the ‘international
integration of markets and the increasing interdependence of economies of
different nations’.[12]
The transformation taking place in the banking industry in Australia is part of an overall change in
the business landscape determined in large part by globalisation which has reshaped
and continues to affect the way Australian companies conduct business. Globalisation
is a dynamic process and developments in the international commercial world
will continue to exert pressure on Australian enterprises.[13]
2.10
The ANZ explained the influence of world trends
on Australia’s banking industry:
Banks raise their capital in a global market, competing not only
with other financial institutions but also with all other companies. These
changes, which were not confined to Australia but occurred around the world,
resulted in cost pressures and performance requirements that made it necessary
for banks to change the way they operated. These changes included some
‘unbundling’ of cross subsidies and a shift to ‘user pays’, heavy investment in
more convenient and cheaper electronic delivery channels, a reduction in the
number of more expensive branches and automation and reengineering of many
processes to make them more efficient.[14]
2.11
Globalisation certainly places greater demands
on Australian businesses. Although it promises economic and social rewards for
those that take up the challenges, others may struggle to understand, accept and
adjust to the changes. It is natural for some to resist change. Mr Leon Davis,
Chairman, Westpac, accepts that the ‘nostalgia felt by many for the good old
days of a controlled currency, protected manufacturers, cross subsidisation of
infrastructure and services, centralised wage fixing etc’ is understandable.[15] But globalisation is not going
away and Australian businesses cannot quarantine themselves from developments
in the international commercial world.
The context of branch closures
2.12
The causes of bank branch closures are complex and
are influenced by both the global market, including world-wide developments in
telecommunications, as well as domestic circumstances. Although deregulation,
technological advances, consumer demands and population movements are treated in
the following section as distinct causes of change in the banking industry,
they often interact providing further impetus for innovation. For example,
advances in technology in particular have presented consumers with a
smorgasbord of options in how to conduct their banking affairs. This development
has fed higher consumer expectations which in turn create a fertile environment
that fosters greater innovation in technology.[16]
2.13
The following section examines the four major
influences on the delivery of banking services in Australia:
-
changes in public policy notably deregulation;
- technological developments;
- consumer preferences; and
- demographic trends.
Deregulation
2.14
Public policy since the 1980s has meant that
Australian businesses are competing for customers against the best enterprises
in the world. Before the 1980s, banks in Australia were protected from competition through regulation which placed
controls on activities such as bank interest rates, asset structures and the
role of new lending by banks.[17]
Banks were regulated in terms of:
the types of products they were allowed to offer and the prices
they were allowed to charge. Credit was rationed through direct controls, and
banks competed for business through the provision of extra services such as
extensive branch networks, rather than on price.[18]
2.15
Under this highly regulated regime, banks built
up a vast network of branches throughout the country. According to Mr Tom Valentine and Mr Guy Ford, the banks’
over-extension in the regulated environment and technological developments had
made physical bank outlets less necessary and led to a situation of ‘disequilibrium’.[19]
2.16
Deregulation of Australia’s financial services industry was intended, among other things, to
remove inefficiencies, improve performance and promote greater competition in
the banking industry.[20]
Financial regulatory policy
2.17
Financial deregulation in Australia has been a gradual process with
the early regulatory changes to Australia’s financial systems introduced in the 1980s. The major initiatives
included measures such as floating the Australian dollar in 1983; the licensing
of foreign banks; the elimination of controls over interest rate and lending
interests; the removal of limits on the number of new banks that could be
established; and the privatisation of the Commonwealth Bank.[21] Mr Leon Davis, Chairman,
Westpac Corporation, explained that:
The reform process allowed Australia to become internationally
competitive, in part by reducing the role of Government. For the first time
business values were allowed to take centre stage and the role of many of the
institutions and systems that had underpinned the previous protected mixed
economy, diminished accordingly.[22]
2.18
As deregulation started to take effect banks, the
traditional providers of financial services, found themselves under pressure to
increase efficiency and improve performance. In this quest for reduced costs
and better efficiency, banks trimmed the number of their branches. As noted
earlier under the highly regulated system, banks had built up an extensive
network of branches. But it was not until the mid-1990s that banks, seeking to
reduce costs by improving operating efficiency, looked seriously at pruning
branch and staff numbers.
2.19
In 1997, the Financial System Inquiry Report
(the Wallis Report) concluded that substantial cost savings were possible if
financial institutions rationalised their distribution system so that high cost
delivery channels such as bank branches undergo consolidation.[23] But the process of cutting back
bank branches was already in train by the time the Wallis inquiry published its findings. Statistics show that the number of
bank branch closures rose steeply during 1996–1997, with more than 380 branches
closing their doors, and reached a peak in 1997–1998 with over 500 closures.[24]
2.20
In the face of on-going competitive pressure,
banks have continued to rationalise branch networks.[25] Mr John McFarlane, CEO, ANZ
Banking Group, explained simply that ‘we had too many branches, not just us but
all of the banks in Australia.
And it was quite natural for us to get down to a core holding of branches.’[26]
2.21
According to the ANZ:
The ability of banks to provide traditional face-to-face branch
banking services to smaller communities in both metropolitan and
non-metropolitan locations has been eroded, particularly over the past decade,
by the competition banks have faced following deregulation of the industry
which began in 1983 with the floating of the Australian dollar.[27]
2.22
The ANZ also noted that deregulation coincided
with ‘a technological revolution that enabled specialist suppliers of financial
services, many of whom operated without the expense of nation-wide branch
networks, to undercut banks’.[28]
Moreover, consumers were becoming more sophisticated, computer literate and
comfortable with the newer electronic delivery channels.
2.23
Most commentators concur with this view about the
effects of technological advances and place technology alongside deregulation
as a major influence behind branch closures. In their view, the reduction in
bank branch networks in large measure reflected pressures for branch rationalisation
driven by technological progress and a move away from the earlier
over-expansion which had been used to attract customers in the heavily
regulated environment.[29]
Technological developments
2.24
The growing use of electronic banking from
EFTPOS to the Internet has transformed the way people carry out their banking.
Technological change presents the consumer with a growing range of options in
how to conduct their most basic banking transactions.
2.25
In 1996, Mr William Ferguson, a Banker, observed:
From only a few years ago, when bank passbooks were slipped down
a chute for signature verification, when account balances were depicted in neat
handwriting and bank managers decided whether to grant loans on the basis of
the length of time applicants had been clients, not only of the bank, but of
particular branches, we have come a long way.[30]
2.26
Since then, improvements in information
technology have dramatically influenced the provision of financial services.
The use of ATMs and EFTPOS has increased substantially and telephone banking
and the internet are now accepted as part of everyday banking. The pace of such
change is rapid and drives the growing demand for electronic trading. Irrevocably
Australia’s economy is
undergoing profound change driven by technological innovations which have led
to a reduction in the cost of providing some financial services and made
readily available a range of new products and delivery systems. According to Professor Ian Harper:
Like their counterparts around the world, Australia’s major
banks are working through the most significant technological revolution in
their history. They simultaneously face the lowering of natural and legislative
barriers to competition from offshore as well as the burgeoning impact of
financial markets offering substitutes for their traditional balance sheet
products, e.g., managed funds in place of term deposits.[31]
2.27
Technological innovations are proving popular with
customers who are taking up new service channels with enthusiasm. This leads to
the third major force behind bank closure—a shift in consumer demands. Again
this cannot be considered in isolation.
Changes in consumer preferences
2.28
In 1996, William Ferguson argued
that the main push for change would come from consumers. He stated:
It will be the services that the end-users want, the products
they like, the style of delivery which is most convenient to them and whether
the relationship is transaction-specific or long-term, which will primarily
dictate how the provider responds; not, by and large, the provider determining
what the customer needs.[32]
2.29
The major banks have no doubts that consumer choice
is a significant force shaping their decisions to close branches. In citing the
reasons behind the closure of 56 of its regional branches, the Australian National
Bank (the National) explained that the transformation of the regional and rural
network is being undertaken as a result of ‘rapidly changing customer
preferences and a noticeable decline in the number of over the counter
transactions’. It suggested that customers have made known that they want a
convenient banking service that suits their needs.
Growing consumer demand for electronic
banking
2.30
The National’s transaction data shows that rural
customers, including farmers, are moving towards electronic forms of banking,
particularly in relation to internet, telephone banking and EFTPOS services.[33] The National noted that since
1999, the number of ‘over the counter’ transactions has dropped from 25 per
cent of its total transaction volume to less than 9 per cent. In relation to
rural customers, ‘over the counter’ transactions now make up only 12 per cent
of its total rural transaction volume.[34]
2.31
In line with the National’s experience, Westpac
maintained that more than 90 per cent of banking transactions are undertaken
outside of branches. Moreover, it noted that customer preference for easier and
more convenient means of doing their banking was encouraging further
innovation. It stated:
More than ever, our customers are telling us they want to be
able to access ATM, EFTPOS, Telephone and Internet banking services quickly,
easily and cheaply.[35]
2.32
Consistent with the trends identified by
individual banks, the Australian Bankers’ Association (ABA) maintained that
over the last decade bank customers have moved from undertaking only 10 per
cent of their transactions outside a bank branch, to now conducting about 90
per cent of their transactions outside the branch.[36]
2.33
These figures register an unmistakable message from
consumers that they prefer, and have come to expect, the ease and convenience of
transacting basic banking services through the newer service channels. Further,
they indicate that electronic banking is likely to grow in popularity. As noted
by Mr Robert Joss, who works in
the banking industry:
Having the ability to deposit a cheque and withdraw funds at an
ATM at 11.00 pm rather than between 10.00 am and 3.00 pm at a branch is a new,
and obviously more convenient way of facilitating payments between parties.[37]
2.34
Although technology offers the prospect of much
greater convenience and lower transaction costs, Mr Joss observed that
there is a downside to this development:
What banks cannot afford to do is to keep the old branch network
for facilitating payments and simply add on the new technology. New players in
the market will invest only in the new technology and their costs will be
commensurately lower. For banks to be able to compete they must somehow
substitute the new for the old, to arrive at a much better balance of costs and
consumer choices. Customers are not prepared to pay the cost of operating both
the old and new technologies.[38]
2.35
Clearly, over the last decade banks have responded
to the major shift in consumers wanting convenience, better value and more choice
regarding their financial services.[39]
The new technologies are leaving old practices in their traces. The economic
pressure on banks is to win market share, maintain profitability and minimise
risks and to do so means that they must remain at the forefront of
technological advances. One of the costs, however, is in reduced over-the-counter
service.
Banks investing in new technology
2.36
While consumer demand is driving the
introduction of new technology, the impetus for electronic banking is also coming
from the banking industry which appreciates the cost savings it offers.
2.37
The ABA pointed out that face-to-face services are expensive to deliver
because of the substantial costs in hiring and training teller staff, with
renting premises and providing adequate security associated with managing cash
deposits. It argued that the switch to electronic banking means that
maintaining multiple facilities has become less viable in small towns. Put
simply, the emergence of electronic banking as a popular carrier of
transactions creates difficulties for some small towns to sustain over-the-counter
banking facilities.[40]
Summary
2.38
ATMs, phone banking, EFTPOS machines and Internet
banking offer easy access to many banking transactions. The growing popularity
with customers together with the advantage of lower costs has secured electronic
banking a prominent place in the delivery of financial services. Realising the
value in providing customers with electronic banking facilities, banks have invested
in the new technologies such as telephone, Internet and a range of electronic
bill payment systems.[41]
2.39
The substantial investment in new technologies
through the 1980s and 1990s and which continues today, has enabled customers to
bank 24 hours per day, 7 days a week and from the comfort of their own home or
workplace. Most witnesses and financial commentators accept that there is no
going back—the trend toward even greater innovation in electronic banking is
irreversible. The trade-off, however, is the loss of bank branches offering
traditional over-the-counter services.
Demographics
2.40
Many attribute the withdrawal of banking services
in country areas to population shifts away from regional Australia. Most statistics show the
tendency for Australia’s
population to concentrate in major cities, coastal areas and the larger
regional towns. This trend is consistent with developments that have occurred
since the middle of last century.[42]
2.41
The Australian Bureau of Statistics (ABS) maintains
that in 1911, 43 per cent of Australians lived in rural areas. This proportion
fell steadily until 1976 when only 14 per cent of the population lived in rural
areas. From this period until sometime during the first half of the 1990s the
population in country Australia
began to grow slightly. The 1996 census, however, indicated that the population
in rural areas as a proportion of the total population had again started to
fall.[43]
2.42
The population in some regional areas of Australia is shrinking not only as a
proportion to the total population but in real terms. The ABS noted that ‘some
areas of Australia have
experienced significant population decline in recent years’. While some losses
have occurred in established suburbs within capital cities and major urban
centres, it argues that the fastest population decline has occurred in rural
areas. Most of this decline has been caused by net migration loss[44] and is associated with
technological, social and economic changes and industry restructuring in local
economies.[45]
The drift in population to larger regional
centres and the ‘sponge city’ effect
2.43
There are also discernable patterns to
population movements across inland regional Australia. While the population in regional Australia is in general decline as a proportion to metropolitan Australia, some areas are defying this
trend. Indeed some regional centres and coastal towns are among the fastest
growing areas in Australia.[46] The Interim Report of the
Steering Committee on the Summit on Regional Australia found that economic growth has been uneven in
regional Australia. Some
regions have experienced high growth as a result of diversifying their economic
base, whereas others—still heavily reliant on traditional rural sectors—have
not shared in the nation’s economic growth over the past few years.[47]
2.44
The ABS recorded that a number of regional
centres gained population in the decade ending June 2001. Centres such as
Maitland, and Queanbeyan in New South Wales, Greater Geelong, Greater Bendigo
and Ballarat in Victoria, Cairns in Queensland, Port Lincoln in South Australia
and Albany in Western Australia experienced growth in the five years to June
2001, as they did in the previous five-year period.[48]
2.45
Mr Bernard Salt, a demographer, demonstrated this unevenness in population growth in
country Australia by comparing Hervey Bay and Junee. He wrote:
In 1971 both had about 5,000 people. In 2000 Junee still had
5,000 but Hervey Bay is now 45,000. Hervey Bay is the most remarkable town on
the Australian continent in terms of its population growth—because of a value
shift in the nation in the 1980s. It was more than retirement and tourism, it
was a new strain of tourism that emerged—eco-tourism, based on Fraser Island,
and whale-watching.[49]
2.46
The ABS also noted the tendency for some
regional centres to experience growth in population at the expense of some of
the smaller outlying towns. People from surrounding regions were gravitating to
these centres because of factors such as agricultural restructuring and
mechanisation, resulting in larger and fewer farms and lower demand for farm
workers. Furthermore, improvements in transport and communications, which allow
industries and services in the regional centre to cater to a wide area,
contributed to the growth of these centres.[50]
2.47
It cited Mildura which grew by 3,100 people and
Dubbo by 1,900 during the 1994–99 period as examples of where the decline in
employment and services in outlying areas had encouraged migration to the
inland regional centres. Most Statistical Local Areas (SLAs) surrounding these
centres experienced population decline.[51]
2.48
Mr Salt also commented on this ‘sponge city’
effect where larger regional centres have soaked up the population loss from
the farm amalgamations in surrounding small and remote towns.[52] He used the example of Wagga
in the NSW Riverina where the number of Waggarians rose by 12,416 or 28 per
cent in 22 years to reach 56,566 in June 1998. He goes on to observe, however,
that communities within a 100km radius of Wagga fared differently in the 22
years to June 1998 with population losses between 4 and 29 per cent.[53]
2.49
According to Mr Salt, rural
‘losers’ are scattered throughout all states and some of the losses are
associated with changed mining practices (west coast), and with changes in
local infrastructure (downsizing Peterborough railway workshops).[54]
He concluded, however, that ‘for the most part, the areas of consistent and
significant loss are attached to the Australian wheatbelt’. His analysis showed
that in such areas the pressure for farm aggregation was greatest, and the impact
of the sponge effects of larger cities was most severe.[55]
Population shifts and bank branch closures
2.50
The banks draw a direct connection between
population trends and the demand for their services. The ABA argued that the thinning population in
many towns means that the ‘economic case for maintaining service levels
delivered in-person in each location has also declined’.[56]
2.51
Dr Gordon Forth also found a close relationship between population loss in rural
areas and the level of banking services available to small towns. He wrote:
Though the loss of services, such as the closure of the local
bank, cinema or pharmacy, are highly significant in explaining small town
decline, they are essentially the consequence of both population loss and
reduced demand for essential and non-essential services.[57]
2.52
A recent study conducted by the National Centre
for Social Applications of GIS, University of Adelaide, supported
the contention that changing demographics in some country areas have seriously
undermined the ability of banks to sustain the level of services that the
traditional branch had delivered. It asserted:
The reality is that both the demographics of many
non-metropolitan areas no longer are sufficient to support the same level of
service provision as the past and improved mobility and information technology
make it possible to access more distant services more readily than in the past.[58]
2.53
The ANZ concurred with this view. It explained
that the higher representation of non-metropolitan areas in the change in
face-to-face banking service levels largely reflects more significant
demographic changes, which have been occurring in these areas over time.[59]
Regional shopping hubs and smaller towns
2.54
Not only are people moving to regional centres
but those living in outlying towns are drawn to major centres to conduct their
financial affairs.
2.55
An ABARE survey found that there was a
significant tendency by farmers to use banking services in regional hubs rather
than in their local towns. In 1990 an estimated 53 per cent of farmers reported
using financial services in regional centres with 36 per cent using their local
town. By 2000, however, 60 per cent of farmers were using banking services in
their regional centres with only 27 per cent continuing to use their local
town. The study concluded that this outcome was consistent with the closure of
branches in small towns in this period.[60]
2.56
The Tamworth City Council added weight to the
ABARE findings that residents from the smaller outlying towns are inclined to conduct
business in the regional centres. It noted that ‘it is a common fact that
citizens from our neighbouring communities namely:
Parry Shire
|
population 11,837
|
Manilla Shire
|
population 3,256
|
Barraba Shire
|
population 2,169
|
Bingara Shire
|
population 1,982
|
Gunnedah Shire
|
population 12,480
|
Quirindi Shire
|
population 4,752
|
Nundle Shire
|
population 1,359
|
Walcha Shire
|
population 3,200
|
commute to Tamworth for business, medical, schooling, family, social and personal
reasons. It is proper to assume that when these citizens do visit Tamworth (or
other centres such as Armidale and Inverell), they would plan to carry out
personal or business banking activities and any other financial services
required as part of their trip’.[61]
2.57
The evidence clearly suggests that local
residents of small country towns are tending to bypass their town to travel to
the major centres to shop due in part to a loss of services in their local communities
and also their desire to access a broader range of products.
2.58
Rural areas where larger regional centres are
growing at the expense of smaller towns, pose problems for service providers
who face difficult decisions about commercial and social obligations to those
in smaller towns. The loss of consumers to the larger regional centres erodes
the customer base of banks in the smaller communities making their economic
viability even more precarious.
Questioning the nexus between population
trends and branch closures
2.59
It should be noted that while the evidence
indicates that there is a strong link between population growth and the
presence of a bank branch, some submissions argued otherwise. The Surf Coast
Shire Council noted that, unlike many other rural centres that have lost their
banks, Winchelsea has been steadily growing. It suggested that with the
foreshadowed upgrading of the Princes Highway the outlook for Winchelsea is for
continued growth—and yet no major bank has the commitment or foresight to
provide this essential service to the town (other than ATM facilities through
the local post office).[62]
2.60
The Manilla Shire Council and the Barossa
Council together with other local councils expressed the same bewilderment at
banks closing branches in regions of economic or population growth. The Barossa
Council noted simply ‘there could not be a more successful area in the state and
perhaps in the country, and yet the branches are gone’.[63]
2.61
The Summerland Credit Union Limited observed a
similar occurrence. It stated that over the past ten years at least 26 bank
branches had closed within the Richmond and Tweed Valleys, with services being severely reduced
in many others. It claimed that this is happening, despite the region’s continuing
strong growth, as ‘the “seachange” phenomena continues to see metropolitan
babyboomers and others seek a better lifestyle in regional areas’.[64] From its perspective, it was
clear that:
...the banks have different views as to what constitutes a
profitable branch and have not given a lot of thought to the changing dynamic
of certain areas. For example, the Tweed Valley has been identified as the
fastest growing region within NSW (if not the whole of Australia) and yet the
banks have heavily reduced their presence throughout the valley.[65]
2.62
Clearly banks have withdrawn or reduced their
services because of what they perceive as a less profitable economic environment
in particular localities. While population trends are a reliable indicator of
the economic health of a community, banks, when deciding to either close or
open a branch, consider the overall strength of demand for their services and
the likely return on their investment. For example, John McFarlane, CEO, ANZ
explained that they were more likely to consider opening branches in the more
rapidly growing areas such as the Gold Coast which he regarded as a ‘tremendous
growth opportunity’.[66]
2.63
In other words, there are some areas in regional
Australia that will attract
banks to their locality while others offer little commercial incentive for
banks to stay. This is an assessment made by individual banks—they may not
always be right—and their interpretation of profitability may well differ from those
of their customers.
Conclusion
2.64
Since 1994 there has been a steady decline in
the number of bank branches. Deregulation, technological progress, shifts in
consumer demands and demographic trends have contributed to the pressure on
banks to trim their branch networks. They now operate in a highly competitive
environment shaped in large measure by the global market. This competitive
market has changed the face of banking as financial service providers implement
ways to increase efficiency, improve performance and reduce costs. With the
help of advances in technology and shifts in consumer preferences, banks are
now able to offer consumers a range of services. The tradeoff, however, has
been the rationalisation of bank branches. Some localities in regional, rural
and remote areas simply can not attract or retain their local branch. From the
banks’ point of view the volume of business is not sufficiently profitable and
they have taken the commercial decision to withdraw their services.
2.65
The following section seeks to understand the
effects of branch closures on the community. It identifies and describes the
consequences of such actions on the people living and working in country areas
where banks have withdrawn or downgraded their services.
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