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Chapter 3 - Impact of Bank branch closures on the Community
Banks have been part of Australia’s history since 1817 when the Bank of
NSW first opened its doors. They have played an integral role in the progress
of the nation and in promoting the development of country areas. The local bank
branch has stood at the centre of commercial life in country towns for
decades—a familiar, reassuring, solid and valued part of the community. An
abandoned bank building in a country town has deep significance for local residents.
3.2 This chapter draws on the experiences and expectations of those living
in regional Australia to understand the effects that branch closures are having
on them and their community. It gives particular attention to:
- the context of branch closures including the overall provision of
services to regional, rural and remote Australia; and
- the effect of branch closures in country Australia on
- local residents,
- local business, and
- the communit
General decline in the provision of services
Some regard the withdrawal of bank services as part of a general erosion
of the provision of services to country areas of Australia.
Mr Leon Davis, Chairman, Westpac Banking Corporation, described this process:
In a thousand towns and villages in rural and remote Australia,
the future appears increasingly bleak. Jobs, schools, banks, post offices,
country hospitals and footy teams; all are disappearing like water holes in an
extended drought. People who once saw themselves as the economic backbone of Australia
and the embodiment of Australian virtues such as self reliance and endurance
feel their contribution past, current and potential is forgotten or
unappreciated. They feel betrayed, powerless and angry.
The ABA also placed bank closures within the broader context of vanishing
services. It stated that banks, like many other service providers including
governments and government business enterprises, have responded to commercial
pressures from demographic changes. It argued that the provision of banking and
financial services in the country must be viewed against the background of much
wider change where services such as schools, police stations, hospitals and
commercial businesses like pharmacies are in decline.
It cited a paper prepared by Adelaide University which observed that:
The loss of services in parts of non-metropolitan areas
has often been blamed predominantly on private sector organisations, who are
depicted as being totally driven by bottom line considerations and lacking a
community good element. However, the reality is that the thinning out of
services in those areas has been equally apparent among government provided
services. Indeed, some would argue that the government provided
services—schools, health, hospitals and police especially—are bellwether services;
that is, that once they are lost there is a dramatic impact on the community
that flows through into other services as well as having very detrimental
Many local councils concurred with this broader view. The Barraba Shire
Council maintained that the second biggest obstacle to growth and development
of their district, after the departure of government services, ‘is the
withdrawal and the perception of the withdrawal of banking and financial
services by the established retail banks’.
3.6 The Millmerran Shire Council chronicled the deterioration of services in
This community, over the past 20 years has seen the
closure of the State Government Office of the Clerk of the Court, the closure
of the Railway Station and the closure of the CBC and Westpac banks. The
National Australia Bank continues to operate however the signs are ominous as
the NAB has sold all its assets, ie land and buildings and has significantly
downsized staff presence in Millmerran to one permanent and two casuals.
It went on to state its concern that banking
services in Millmerran will shortly disappear and is at a loss as to how this
trend can be reversed.
3.7 The Shire of Victoria Plains also noted that the decline of services in
rural areas was not confined to banking but applies widely to the provision of
services across the board. It maintained that the loss of such traditional
services as Post Offices, banking, government utility services such as power,
water and gas, have seen marginal operations in the smaller rural areas depart
and the flow-on effect has led to the demise of country towns particularly in Western
Australia. It concluded that ‘in other than major regional centres the services currently
available to rural residents is non existent’.
There is little doubt that some areas of regional Australia are
experiencing a general reduction in the provision of services.
While the subject of regional development is outside the scope of this report,
the Committee recognises that the fate of banking services is inextricably
caught up in the overall prevailing economic and social climate of the
community they serve.
Branch closures and the decline in service provision to country Australia
While it would appear that the closure of bank branches is part of the
general decline in the provision of services to country Australia, it may also
accelerate this trend. The Hindmarsh Shire Council clearly saw the withdrawal
of a local branch as a dire signal. It stated that the closure of the last bank
branch, can be the ‘beginning of the end’ for a small town.
Mr Barber from the Latrobe City stated simply that for a small community when
a bank or school closes, ‘the heart stops pumping in those communities.’
3.10 The following section looks in greater detail at the effects that branch
closures have on:
- residents of districts that have lost a branch;
- local businesses; and
- the community.
The effect of bank closures in country areas on local residents
Many submissions noted the problems a bank closure creates for individual
customers. The most immediate consequences for individuals and businesses
requiring personal banking and financial services is the trouble and anxiety
associated with having to make alternative banking arrangements coupled with
the worry and uncertainty caused by having to adapt to new ways of banking.
The problems are particularly acute if the branch is the only one remaining in
Inconvenience and costs
In particular, the submissions referred to the inconvenience caused by
having to travel to the nearest branch.
In some cases, people have to journey a considerable distance which adds to
costs and is time consuming. The expense and inconvenience can be considerable
in regional areas with poor transport systems and where significant travel is involved.
The Goulburn City Council noted that as with many rural communities the smaller
townships around Goulburn have a high dependency on private vehicle transport
because they do not have access to public transport services.
3.13 The Uniting Church Synod of South Australia highlighted the difficulties
that some people in regional Australia could experience:
For rural areas where there are high levels of
unemployment and reduced capacity to travel, the costs of banking borne by the
consumer are significant. In Port Pirie, for example, the levels of
unemployment are higher than the national average. Elderly people need to rely
on the generosity of family and friends. For some widows in Wilmington, for
example, who have banked with a chequebook for much of their lives, are now
required to drive on the highway for an hour, or be reliant on someone who can
drive, to get to the nearest branch in Peterborough.
Savings and security implications
Moreover, not being able to access over-the-counter services limits people’s
choices and creates circumstances where they may deposit and withdraw larger
amounts of cash. The lack of access to over-the-counter banking services may
also be less of an incentive to save. The Uniting Church Synod of South
Australia emphasised the point that the customer bears the costs rather than
the bank as a result of changing bank practices:
Banking now causes customers increased costs in fuel and
time for example, and the customer is now responsible for larger cash
withdrawals held for longer than previously.
A number of submissions from local councils could see a direct
connection between the reduction of banking services and the loss of
opportunity for residents to better manage their finances. The Local Government
Association of Tasmania maintained that as banks withdraw from small towns and
regions, competition is lessened and the ability of members of the community to
‘shop around’ for the best banking option is constrained.
Likewise, the District Council of Robe asserted that areas serviced by
Worse still, as pointed out bluntly by the Goulburn City Council, ‘when
banking services are withdrawn there is not always the choice to commute to
higher order centres’.
This means that residents have limited choice, in some cases effectively no
choice, in selecting a financial services provider or range of products to suit
their particular needs whether it is opening a basic transaction account,
accessing facilities such as ATMs or obtaining a loan or investment advice.
- provide no competition in relation to bank fees, overdraft and
credit interest rates, etc for businesses that need to be able to deposit cash;
- are limited in the availability of banking services—shorter
opening hours; and
- do not always offer a full range of banking facilities.
While the trouble and expense of travelling long distances is an obvious
and easily understood difficulty, the lack of adequate financial services, even
though less apparent, may have more serious and longer term repercussions for
sectors of the Australian community. The Barossa Council submitted that ‘it is
the personal service that banks previously provided that is lost, particularly
in rural areas’.
Those without access to face-to-face banking may find themselves on the fringes
of the financial world effectively excluded from the benefits that the banking
industry offers its customers. The Council of the City of Ballarat stated
plainly that while people want to withdraw and deposit money, pay bills and transfer
funds, they also want advice.
A study conducted by the Financial Services Consumer Policy Centre,
argued that ‘The more an individual or community is marginalised from financial
services, the more likely it is that they will also be socially excluded, which
exacerbates their overall civic marginalisation’.
It defined financial exclusion as:
the lack of access to financial services by individuals
or communities due to their geographic location, economic situation or any
other ‘anomalous’ social condition which prevents people from fully
participating in the economic and social structures of mainstream communities.
According to the study, those at highest risk of suffering financial
exclusion include people on low incomes who are in receipt of social security
benefits (including pensioners and unemployed), with low education, and living
in depressed economic areas or rural and regional areas.
3.21 As noted earlier the banking world has changed and there are now on
offer a vast array of sophisticated products. Marianne Gizycki and Philip Lowe
cited in particular the effect that the introduction of compulsory retirement
savings in 1991 has had on the way people save for retirement. Indeed, just in the area of superannuation alone, there is a growing realisation
of the need for individuals to provide for their retirement rather than rely on
the public purse. Financial advice is central to effective planning but there
is an increased risk that people in regional, rural and remote Australia will
simply not have access to such advice.
In summary, the loss of a bank branch, especially if it is the only one
in town, has wide-reaching implications for local residents. The main problems
- the inconvenience, worry and extra costs associated with having
to rearrange or transfer bank accounts or learn new ways of banking;
- the inconvenience and additional costs involved in travelling to
the nearest branch to conduct business—keeping in mind that not all residents
will have ready access to their own transport and may have to rely on public
- the safety, security and savings implications that arise where
residents may withdraw larger amounts of cash than they normally would to tide
them over until the next trip to a bank branch;
- the absence of competition leaving residents with limited
choices, in some cases effectively no choice, in the range of financial
services and products available to them which could lead to loss of saving or
investment opportunities; and
- the lack of readily available advice from local bank staff who
understand the community—this is particularly important as the provision of
financial services is becoming increasingly more sophisticated and there is now
a heavy reliance on self funding for retirement. With the withdrawal of
financial services from country areas comes an increased likelihood that some
people may find themselves effectively excluded from the financial world.
The effect of branch closures on businesses in country towns
Many submissions spoke of the central role taken by banks in the
community and the economic development of the town.
The Yallaroi Shire Council submitted that it is important to local business
that a full range of banking services be provided and this necessitates an
The report now turns to the effect that the withdrawal of bank branches from
country towns has on local businesses.
Daily banking affairs—inconvenience and
When a local bank branch closes, businesses have to deal with the same
problems as residents. They experience the inconvenience and bear the added
costs associated with travelling to a bank branch in another district. The
Tamworth City Council made the point about the costs involved in travel for
Banks do not have to factor into their financial
strategies a situation where for example a farmer or small business accountant
has to travel from a rural town for example Barraba to a Regional City
for example Tamworth to meet with a banker face to face in order to
determine a crucial financial decision between that banker and the client. In
this example, the small business accountant may have to allocate three to four
hours of his time in travel and business. In this example, the accountant’s
hourly rate plus his loss of potential business whilst he is absent in a
Regional Centre is a charge against his business—not a concern of his banker.
The Victorian Farmers Federation reinforced this point. It argued that
the increased costs incurred for example in additional travel to access bank
services for the remaining businesses will result in margins being reduced or
the additional costs being passed on to consumers through higher retail prices.
Safety and security associated with cash
Clearly, the withdrawal of local bank branches from country towns creates
particular difficulties for businesses in the district. The security and safety
concerns associated with managing cash holdings, however, are particularly
significant for small business. The KPMG research report, Small Business
Banking in Australia, found that:
For the majority of small businesses, cash, cheque, and
credit cards are the main vehicles of exchange. Without effective and efficient
access to money transmission systems to handle these vehicles, small business
will be at a distinct disadvantage.
In concluded that, ‘For those small businesses with a
high volume of cash and cheque transactions access to a “local” facility
(branch, agency or franchise) is essential’.
A number of witnesses emphasised this view and argued strongly that some
form of traditional banking is important for the provision of cash to the
township. Mr Walter Brooks, Council of Small Business Organisations of
Australia (COSBOA), agreed that managing cash flow and making arrangements for
holding cash secure is a particular problem for businesses in towns with no
He stated that businesses are inclined to ‘hold onto their takings for an
additional day or two to save a trip to the regional centres.’ Further, that
this tendency has an impact on their normal day-to-day liquidity and ‘brings
about the situation where they are holding cash to pay the wages and thus
exposing themselves to an increased security risk within the business
The Cabonne Council suggested that businesses are forced to close not only
because their customers are shopping in another centre but also because the
businesses can no longer do daily banking themselves. According to the council,
business finds it impossible to maintain an adequate cashflow, and if the small
town business is operated by a sole proprietor it would be almost impossible
for him/her to deposit the daily income without closing the business itself.
Areas that have a significant tourism industry highlight the
difficulties faced by small business in managing their cash flow and their
greater need for a branch service. For example, tourism attracts numerous
international visitors who experience difficulty in undertaking financial
transactions in some rural and remote areas.
The Winton Shire Council submitted that there is a significant cash
requirement, for example, for the opal industry where buyers arrive in town to
purchase opal and can require tens of thousands of dollars with less than 24
Mullewa in Western Australia is promoted as the wildflower capital of the
country and tourists are shocked when they arrive and there is no bank for them
to visit [closed 1993].
The District Council of Robe, which is serviced by one bank, noted that
unless customers bank with the one available institution, there is no facility
to deposit out-of-hours cash. It maintained that this was a problem during the
peak tourism season as businesses may have to hold substantial sums of cash.
The Committee accepts that small businesses need a convenient local
facility to facilitate safe and reliable money transactions.
Fall in trade
The downgrading of services or the closure of a bank branch, especially
the last branch in town, has an effect on other services in the town. Where
people leave the area to conduct over-the-counter banking business in a larger
regional centre, they tend while there to carry out other business. This means
that the smaller towns lose customers. Many local councils and community
organisations expressed their concern at the harm done to local business when
the town loses its bank branch and residents tend to do their shopping in the
centre where there is a bank branch.
They refer to the negative flow-on effects for local business and the
undermining of optimism and business confidence in the town.
For example, the Rosalie Shire Council and the Lockhart Shire Council
observed that the loss of banking facilities in rural and remote towns leads to
a large amount of escape spending and loss of economic opportunity as people
travel to other centres to do their banking.
The Post Office Agents Association Ltd supported the contention that the
withdrawal of financial services from rural communities has a highly adverse
impact on the underlying viability of such communities. It maintained that it
forces customers to larger regional areas, changes purchase patterns and
reduces the circulation of money in the smaller communities. It submitted:
it has been the long experience of Post Office Licensees
who operate their businesses in Australia’s rural communities that when people
are forced to travel to larger regional areas to undertake their banking
services they inevitably seek their goods and services from a location close to
where they obtain their cash. The absence of adequate financial services will
progressively destroy small communities.
The Guyra Shire Council described this process as the multiplier effect:
Not only are local jobs lost to the town, but ultimately
families leave the town thus providing added pressure on schools, health
facilities, business and other services in the town. The closure of bank
branches also can result in people being required to conduct their banking
business in other towns. This has the added strain on small towns, as while
people conduct their banking business in other towns, they also tend to conduct
an increasing amount of other business in that other town thus reducing the
viability of a number of other businesses in the town which lost the banking
Some witnesses described the effect of branch closures on local
enterprises as devastating.
Mrs Wendy Zerbst, Secretary, Nanango Progressive Community Ltd, told the
Committee that ‘If we had not opened [a community bank] when we did, I would
suggest that there would be possibly—a wild guess—70 per cent of the population
going to Woolworths in Kingaroy to do their shopping. Where would that leave
our cooperative food store?’
A number of people have attempted to place a dollar value on the loss to
a community of a bank closure. In 1997, Mr Chris Sidoti, former Human Rights
Commissioner, suggested that a bank closure costs the local community an
estimated $350 per person per month as people transfer their shopping to their
Edenhope and District Community Bank Steering Committee cited research
that indicated that for every person ‘that now has to travel to a larger centre
on financial business, $4,000 per head, per annum is then spent out of our
The Uniting Church Synod of South Australia stated that it has been estimated
that the closure of a full time bank service takes approximately $500,000 from
a region in the first year.
There is no doubt that the loss of a bank branch threatens to undermine
the economic life and confidence of the community. Indeed, one of the major
motivating forces driving community groups to retain a banking service in their
area is the fear that the withdrawal of their local bank branches would trigger
Erosion of business-banker relationship and
the loss of business opportunities
The research report by KPMG, Small Business Banking in Australia,
outlined the close relationship that develops between a small business and its
bank. It noted:
A history of working with an individual small business
through its growth phases and during its ups and downs, allows a bank (or other
financial institution) to develop a better understanding of its track record
and the capabilities of the owners.
It goes on to state that as a result, ‘it is better able to respond in
times of need to the requests of owners than would be the case of an
alternative provider which doesn’t have the same knowledge’.
The Steering Committee on the Summit on Regional Australia also found
that impediments such as lack of awareness of new business opportunities, lack
of access to capital, low take-up rates of government business assistance, and
under developed business skills prevent people from turning local advantage
into business ventures.
Clearly, the withdrawal of branches deprives local business of ready
access to information from banking experts who have a sound appreciation of the
economic potential in the locality and likely sources of finance. Many local
councils spoke of the disappointment experienced by local businesses at the
growing distance between the bank and their business community as bank managers
withdraw to regional centres. They are frustrated at their inability to
establish and maintain the rapport needed for a sound business-banker
relationship and concerned about becoming a community ‘poor in its financial
According to Councillor Burgess from the Northern Areas Council, this
lack of active engagement between local bank branch staff and residents and
businesses means lost economic opportunities. He drew from direct personal
experience to illustrate the difficulties country people have where there is no
branch manager with an understanding of the locality:
I have been trying to organise the purchase of a piece
of farm machinery I wanted to lease because that is what my tax adviser advised
me to do, for tax reasons. But the local girl who is now trying to manage the
branch had no knowledge of that. She contacted a bloke in Adelaide who had no
knowledge of that and who said to me, ‘You just want to borrow money.’ I said,
‘No, it is about leasing.’ You need to have knowledge of the tax advantages
associated with that—so you lose that local knowledge. That is the case because
I am dealing with a bank. But if you actually have someone in the community who
can talk to people and people can casually ask questions of, that knowledge is
transmitted so therefore all the businesses and farms and communities can use
that knowledge. Whether they use that particular bank or not does not matter
because they gain knowledge and can therefore run a better business. In theory,
the wealth of the community can be enhanced by having that information
available to some degree in the community at all times.
The Surf Coast Shire Council reinforced this point:
Local managers and tellers had the local knowledge and
personal understanding to assist the farming and business community in finance
and banking decisions. The branch provided a ‘face’ to banking and the capacity
to provide answers to queries on the spot, without the need for lengthy waits
and redirections through computerised call centres. The local branches were the
bankers for local clubs and associations of which bank staff were often
members...Overall the bank played an integral part in community building.
Limited choice in accessing finance
The absence of competition in the banking sector in small towns further
hinders local business in structuring their affairs to best suit their needs.
The Northern Midlands Council submitted that the majority of businesses in the
district are small in nature and lack the resources and market power to ‘shop
around’ for the best banking option. It claimed that they are often not in a
position to fully understand the clauses and conditions in banking.
Local businesses are particularly disadvantaged in obtaining loans.
As a general observation, the Victorian Farmers Federation stated that
bank closures make it more difficult and costly for farmers to access finance
for business investment.
Similarly, business people regret the loss of the local bank manager who had
direct knowledge of the local community and business. He was regarded as a
‘significant asset to their banking relationship’ who years ago was seen as
‘almost a partner in many businesses’.
This was particularly so in obtaining finance. Mr Brooks, COSBOA, told the
...what small business needs is an opportunity to go to
someone who can talk to them about the alternatives they have with regard to
how they finance their business; if they want to get a letter of credit or
something like that, what does it involve; likewise, issues such as you raised
with superannuation: ‘What are the alternatives there?’
Members of the Northern Areas Council cited examples of where banks
appeared to be unduly cautious in providing finance to local businesses.
Councillor Burgess suggested that in part this approach by the banks could be
due to the loss of a local branch manager who would better have appreciated the
circumstances of the local business.
The Committee understands that the loss of direct contact with a bank
branch cuts small local businesses adrift from the mainstream commercial world.
This exclusion puts them at a disadvantage in obtaining banking and financial
advice, in being aware of new business opportunities, in negotiating business
deals especially bank loans and in attracting investment. It also deprives a
community of a vital source of encouragement and venture capital.
Clearly, the loss of bank branches places significant pressure on small
businesses which may miss out on opportunities to expand and may ultimately
have to close their doors.
Although the withdrawal of banking services causes difficulties for local
businesses similar to those experienced by the individual resident in some
cases they have more serious repercussions. In summary, the main difficulties
encountered by local businesses are:
- the inconvenience and extra costs associated with having to
rearrange or transfer bank accounts;
- the inconvenience and additional costs involved in travelling to
the nearest branch to conduct business—every hour on the road is a cost to
- the safety and security issues that arise from managing cash
flows and the accumulation of excess cash waiting to be deposited—the transfer
of large amounts of money exposes business to new and greater security risks;
- a fall in trade because local customers may be more inclined to
shop in the town where their bank is located rather than patronise their local
- the loss of economic opportunities because of the lack of readily
available professional advice from bank staff who understand the region; and
- limited choice in accessing finance and in obtaining loans on
terms similar to their city counterparts.
The effect of bank branch closures on the community
The closure of bank branches affects not only local residents and
businesses but the community as a whole. Put simply, ‘when you lose the banks
you tend to lose your town—it tends to die’.
The Council of the City of Ballarat highlighted the flow-on effects of branch
Traditionally the bank was not just a place to do business, but
a place that was involved in the welfare of the community, not only as a local
employer, but as an adviser to the community. The bank manager provided advice
to the community, mostly financial, but often on other matters important to
community life. In short, the bank had a leadership role in the community. That
role has now disappeared and communities have lost a valuable resource.
The Northern Areas Council drew similar conclusions about the
consequences of the loss of bank staff on the social and economic life of a
small town. It stated:
In a small country town a bank is more than just a
central point to undertake financial transactions. It can represent up to four
or five salaries that are earned in that town with that money being spent in
the local supermarket, butcher, bakery, hardware store, take-away deli, garage
and hotel. The families of the bank workers ‘provide’ the children to keep the
local school operating and help to ‘make up the numbers’ to justify health and
police services. From a community perspective the local bank manager would be
the JP able to attest documents or authorise auditing of the local footy team’s
accounts. As a respected member of the community the bank manager would be
asked to talk to schools and local community groups and might even chair the
local progress association. For some small country towns he/she might be the
only qualified professional person working in the town able to assist farmers
with business and financial planning.
Losing access to such a range of skills and experience
can be quite devastating and demoralising for a small country town.
These councils were not alone in arguing that residents value the
personal contact, communication and interaction with local branch staff and
that branch rationalisation has had a detrimental impact on the Australian way
of life in country towns.
Taken together, the effects of a branch closure are profound on a community and
permeate every layer of community life. The Victorian Farmers Federation
conveyed the sentiments of many of the local councils that wrote to the
Committee. It submitted:
The effect of bank closures on local community
confidence should not be underestimated. In addition to the economic loss to
the community of the bank closure, the vacant shop in the main street has a
significant demoralising effect. The empty shop will be seen every time people
drive through the town.
If the bank closure is followed by reduced local
economic activity and other business closures, the remaining businesses and
local government will find it more difficult to attract new investment and new
skilled residents to the community.
Bank closures in small rural communities can result in
families moving away from town to seek alternative employment. This has flow-on
effects in reduced local expenditure, and possibly reduced participation in
local schools, sporting groups and community organisations may threaten their
ongoing viability. If schools, sporting groups and community organisations are
put at risk by job losses, the social glue which holds small communities
together may disappear.
Two enduring images used to describe the impact of the withdrawal of
banks—the beginning of the end for a small town, and the slow death of the
community—capture the frustration and sense of futility experienced by
communities who have lost their bank branches.
Bank branch closures in country towns tend to be part of an overall
pattern in the reduction of the provision of services such as education, health
and policing in regional Australia. Even so, for some communities the loss of a
bank branch has far-reaching consequences not only for individual residents and
local businesses but for the town as a whole.
The Committee cannot ignore the many submissions that recounted their
experiences of branch closures. In this chapter, the report has identified the
problems facing residents, businesses and the community where banks have
withdrawn their branches. The main concerns were with the inconvenience and
costs involved in rearranging or transferring accounts, in travelling long
distances to conduct face-to-face banking, with safety and security matters
arising from the lack of access to a branch, the loss of economic
opportunities, limited choice in obtaining professional advice and finance,
especially venture capital, and exclusion from the financial world for both
individuals and businesses. These concerns stand as the main reference points
for the remainder of the report which will concentrate on the initiatives being
taken by banking and financial service providers to address the problems.
The following chapter deals with the more immediate difficulties created
by a branch closure. It reviews the practices of the banks when closing a
branch and the steps that they have taken to better manage such closures.
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