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Chapter 4 - Managing branch closures
The Australian Bankers’ Association (ABA) acknowledged that the various
forces at work shaping the provision of bank services have raised significant
challenges for banks in satisfying the needs of their customers. It stated:
In responding to the competitive pressures of meeting
customer needs, banks have made substantial efforts to mitigate against the
impacts of closures. The banking industry has given general self-regulatory
undertakings on service levels. In March 2001, as part of a package of reforms,
the ABA announced the adoption of the transaction services and branch closure
protocol, which dealt with, in the main, concerns raised by the Hawker inquiry.
There have also been moratoriums on further branch closures. A number of ABA
member banks have now declared their branch rationalisation strategies at an
end. BankWest, Bank of Queensland and Bendigo Bank, for example, are actually
increasing branch numbers.
Moratorium on closure and community reaction
A number of bank executives have conceded publicly that branch closures
over the past years have tarnished the banks’ image.
Mr Ian McFarlane, Chief Executive, ANZ, stated in a radio interview that in
some sense he regretted the withdrawal of branches from the bush because of the
damage it had caused to the community.
Likewise, Dr David Morgan, CEO, Westpac Corporation, acknowledged in a speech
in August 2000 that branch closures had been unpopular decisions and community
hostility had crystallized around them. He stated that closing a branch
‘registers loudly and unambiguously’ in the community.
As noted in chapter 2, bank closures reached a peak in 1996 which
provoked heavy and sustained criticism of the banks’ apparent disregard of the
interests of consumers.
Following this public outcry, some banks gave undertakings that they would not
be closing branches in regional Australia or if they did so would ensure that
some form of over-the-counter banking service was available.
In November 1998, Westpac ‘drew a line in the sand’ and announced its
commitment to maintain face-to-face service in localities where it already had
The ANZ also suspended closures in 1998. It told the Committee that it was
conscious of the impact a branch closure would have on a rural community and in
recognition of its obligations, introduced a moratorium on withdrawing
face-to-face services from any of the rural communities in which it operated.
According to the bank, the moratorium has been enshrined as a ‘promise’ in
ANZ’s Customer Service Charter.
In August 2002, the Commonwealth Bank announced that it would maintain
the number of its branches around the level of 1,000 Australia wide, with
roughly a third of those being located in rural and regional areas. Mr Hugh
Harley, Commonwealth Bank, stressed that this was a ‘watertight commitment’ not
to reduce traditional branch numbers below a thousand.
4.6 Despite these various undertakings, a number of communities in regional Australia
remain unconvinced by such assurances and worry about banks withdrawing from
their district. Many local councils expressed heightened concern to the
Committee about anticipated closures. They fear the likely deterioration of
services and the erosion of the social and economic fabric of their community.
Indeed, some communities have a sense of inevitability about losing
their banks. The Northern Midlands Council stated that should the decision be
made to close either or both banks, vast tracts, if not all, of the Northern
Midlands would be left without banking facilities.
The Winton Shire Council stated that their real concern about the National Bank
closure was a matter of ‘when’ not ‘if’.
The following table shows the number of outlets offering a branch level
of service by the major banks, building societies and credit unions since 2001.
The growth in the number of branches of the Bendigo Bank Limited is a notable
feature which shows that it has been a significant factor in helping to
maintain the level of bank branches constant over the last three years. The
Bendigo Bank is discussed in a separate section of this report which looks at
community banks (see chapter 8).
Table 4.1—Major banks, building societies and credit unions—the number of
outlets offering a branch level of service for 2001, 2002 and 2003.
Variation between 2001 and 2003
Bendigo Bank Limited
Bank of Queensland
Background to the protocol for bank branch closures
Clearly, public disquiet about branch closures persists throughout regional
Australia. In response to public disapproval, the ABA undertook to revise the
Banking Code of Practice which now incorporates a provision for procedures to
be adopted for bank branch closures.
4.10 In the following section, the report turns to this newly formulated bank
branch protocol and assesses its adequacy in addressing some of the anxieties
experienced by those living in regional, rural and remote areas of Australia
about the loss of bank branches.
Development of the bank branch closure protocol
In 1999, the House of Representatives Standing Committee on Economics,
Finance and Public Administration, after inquiring into regional banking
services, recommended that the banking industry formulate a branch closure
protocol which would require banks to adopt specific procedures in the event of
a branch closure. The Committee’s report is known as the Hawker Report.
4.12 During 2000-2001, the ABA commissioned a review of the Code of Banking
Practice which had been adopted in November 1993. During the review, numerous
issues were raised about branch closures particularly in regional and rural Australia.
The review recommended that the code should incorporate the proposals of the
Hawker Report as a minimum standard to be adopted by banks.
On 12 August 2002, the ABA launched the new code of banking practice
with a view to its adoption by the banking industry by August 2003. Banks
adopting this code of practice are ‘to comply with the ABA’s protocol on branch
closures, as published by the ABA from time to time’.
By October 2003, seven banks had adopted the code. As banks sign on to the code
they are added to the list located on the ABA’s website.
The accompanying table sets out the recommendations made by the Hawker
inquiry in 1999, the Government’s response to the recommendations and the
provisions in the newly drafted ABA’s branch closure protocol. While the
Government agreed with the broad thrust of the Hawker recommendations, it
rejected some suggestions. In drafting its branch closure protocol, the ABA
acknowledged the findings of the Hawker Report but as with the Government
stopped short in adopting the recommendations in full.
4.2—The Hawker Inquiry recommendations on branch closures, the Government
response and the ABA’s Transaction Services and Branch Closure Protocol
Hawker recommendation no 20
Branch closure protocol
The industry adopts a branch closure protocol.
The Government supports the committee’s recommendation that the
financial service industry should adopt a branch closure protocol which
provides a guideline of the minimum standards of service delivery in the
event of closing regional and remote branches.
Banks will give three months notice to customers and relevant
community organisations such as the Local Councils of intention to close a
Such a protocol should include industry providing adequate notice of
intended branch closures and consulting with communities.
Where a bank intends to close a rural and remote branch, the bank
will give a minimum 12 weeks written notice prior to the closure, to
customers of the branch and relevant community organisations, including local
Banks will consult with local communities about trends in the
delivery of banking services particularly about developments that have the
potential to affect the delivery of services in that region. Included in this
will be a genuine desire to use community goodwill to improve the viability
of the branch. In the event of a decision to close a branch, banks will
consult with the community about preferred options for alternative services
and on the training to be provided in using alternative channels.
Where a bank gives notice of the closure of a rural or remote branch,
it will offer customers face to face education training and assistance to
help them adjust to changes in the way they access their banking service.
Banks will provide written notice of at least two months before
changing the branch that manages an account (also recommendation no. 3).
The ABA advised that the notion of accounts being domiciled
at a particular branch is outdated. Accounts are no longer managed by
branches, but rather by central processing houses that are responsible for
all of the accounts held with the financial service organisation.
On this basis, the ABA advised that providing information to customers
about where information relating to their account is held is irrelevant to
the issue of branch closures.
In the event of closing or downgrading a branch below agency status,
banks will waive any fees or penalties incurred relating to early repayment
of loans or closing of accounts. (also recommendation no. 17)
The Government does not believe that financial service providers
regularly charge customers fees for closing accounts other than where
necessary to recover the economic costs of breaking fixed deposit or loan
contracts. In any case, the nature of fixed term deposits and loans is such
that customers do not generally need to interact with the financial services
provider regularly and, therefore, would not need to close these accounts if
a nearby branch closed.
In the event of closing a branch, banks will be expected to leave
behind some form of over-the-counter service that allows access to cash
deposits and withdrawal facilities for personal and small business customers
The Government, in particular, wishes to see the financial services
industry give some assurances that an ongoing face-to-face service that
provides cash deposits and cash withdrawal facilities for personal and small
business remains locally available where viable.
Where it is commercially viable to do so, a bank closing rural or
remote branch will ensure that ongoing face to face access is locally
available to its services, which provide cash deposit and cash withdrawal
facilities for personal and small business customers.
Where it is not commercially viable for a bank closing a rural or
remote branch to provide local ongoing face to face services, which provide
cash deposit and cash withdrawal facilities for personal and small business
customers, the bank will inform its customers about accessing its alternative
The preamble to the branch closure protocol states that
the protocol is consistent with the view of the Hawker Report that the industry
should develop a minimum standard of service delivery as a guideline for banks
in the event of closing rural and remote branches.
It should be noted that while agreeing with the general principle that
minimum standards of service delivery should be set down in the event of branch
closures, the protocol is a watered down version of the recommendations made by
the Hawker Inquiry. There are notable omissions from the protocol which also
includes a number of qualifications that narrow the application of some of the
undertakings proposed in the Hawker Report.
The following section examines the new protocol and the undertakings
that it contains. It does not deal with them in the order in which they are set
out in the protocol but rather starts with practices to be adopted at the
notification stage, measures to be followed after notification, and perceived
omissions from the protocol.
Notice of intention to close branch
Period of notice
The undertaking contained in the branch closure protocol that deals with
notification of a branch closure reads:
Where a bank intends to close a rural and remote branch, the
bank will give a minimum 12 weeks written notice prior to the closure, to
customers of the branch and relevant community organisations, including local
The Protocol adopted the Hawker recommendation on this matter with the
added proviso that the notice be in writing.
4.19 Even so, not all groups were satisfied with this undertaking. The
submission by the New South Wales Government to the Review of the Banking Code
of Practice thought that six months notice of closure should be given in the
case of a branch in a non-metropolitan area which is the last remaining branch.
A number of witnesses to this Committee also wanted the protocol to go further
than the Hawker Report and would like to see a more generous notification
period. The Finance Sector Union of Australia called for a stronger protocol
for branch closures containing a minimum six month period of notice. The Holroyd City Council and the Rosalie Shire Council likewise suggested that
at least six months’ notice should be given before any bank closure.
In response to a query from the Committee about the time-frame for
notification of a bank closure, the ABA explained that the 12-week period was
agreed to in the context of an undertaking that was given to leave behind
over-the-counter services. As explained by Mr Stephen Carroll, ABA, ‘it is not
that there will be 12 weeks and then nothing left there for customers to
The CEO of the ABA, Mr David Bell, told the Committee that experience had shown
three months to be an adequate period.
4.21 In a follow-up written response, the ABA informed the Committee that the
banks had reviewed the notice period and had found that the branch closure
protocol was working well and in their opinion there was no apparent need to
change its provisions.
The Committee accepts that a 12-week period of notification is adequate
if customers are able to make a seamless transfer from the branch to be closed
to an agency or similar facility offering over-the-counter services. The
situation is entirely different where no such facility would be available.
Local business in particular should be allowed sufficient time to rearrange
their affairs particularly regarding matters such as switching loan accounts
and managing new cash flow requirements.
4.23 It should also be noted that a substantial amount of time is required to
finalise arrangements should another financial institution or sponsor, such as
a credit union or coalition of businesses, decide to replace the departing
bank. As later chapters show the feasibility studies and planning alone needed
in preparation for establishing an alternative facility can be a lengthy
Any delay in the installation of a fully operational facility would be felt
most keenly by local businesses that have special needs such as cash deposits.
There is also the increased likelihood of business confidence suffering in the
town and local residents taking their custom to larger, better-served centres
before a satisfactory substitute could be established. In cases where the
closure of a branch leaves a community including local businesses without
adequate banking services, the Committee believes that a 12-week notification
period is insufficient.
4.25 The Committee recommends that in cases where the branch is the last
branch in town and because of commercial reasons an over-the-counter facility
would not be available to cater for the needs of residents and local business
the period of notification should be extended to at least six months.
Furthermore, the Committee recommends that banks undertake to assist business
and the community to find a satisfactory solution to their banking needs. Such
a commitment would go some way to alleviating anxiety and providing a degree of
certainty and reassurance to communities who fear the closure of a bank branch.
On the matter of consultation, the ABA clearly departed in its branch
closure protocol from the Hawker Report which recommended that:
Banks will consult with local communities about trends in
the delivery of bank services particularly about developments that have the
potential to affect the delivery of services in that region. Included in this
will be a genuine desire to use community goodwill to improve the viability of
the branch. In the event of a decision to close a branch, banks will consult
with the community about preferred options for alternative services and on the
training to be provided in using alternative channels.
The Government endorsed in general terms the recommendation of the
Hawker Report on the importance of consulting with the community. Under the
current protocol, however, community consultation is not stipulated. The code
merely requires the bank to inform its customers about accessing its services
and to notify the community about the intention to close a branch after the
decision has been made.
This provision falls far short of public expectations in that it does
not facilitate engagement or encourage dialogue between the bank and its
customers. The use of the word ‘inform’ fails to provide assurance that the
banks will listen to the concerns of their customers and the community.
Indeed, a number of submissions expressed concerns about the omission
from the protocol of any undertaking by banks to consult with their customers
and the community about their intention to close a branch. For example, the
Holroyd City Council condemned the lack of public consultation and called for a
banking protocol that requires extensive community consultation.
The NFF stated succinctly that ‘Instead of notice, we would like to see
consultation, which is a bilateral rather than a unilateral thing’. Mr Charles Burke clearly understood that ‘Notice to be given’ means that the
banks are ‘telling you when it is closing’. The NFF would rather see a
Taking up this same point, Mr Anthony Beck, Finance Sector Union of
Australia, maintained that banks have an obligation to provide proper
forewarning of a closure and to allow local communities to respond. Mr Tim
Moore agreed. He referred to the recent closures of 56 of the National’s
agencies where it was announced that there were going to be closures in one
week. He interpreted this behaviour from the bank to mean: ‘We don’t care what
response you’re going to have to that. We’re going to close in these
locations’. He went on to say:
Any kind of signalling and allowing customers to respond and
allowing them mechanisms where, in small towns, they can network, as is allowed
in community banking, will make that easier, because I might make a different
decision when I can talk to a wider range of people in that community than if I
were to make choices on what would be most convenient and cheapest for me. 
The ABA, however, was satisfied that there was a clear presumption that
consultation would take place in the event of a proposed branch closure. Mr
David Bell, stated that prior ‘to a bank making a decision to close a branch,
it obviously conducts a fairly detailed study which includes consulting and speaking
to customers’. He acknowledged, however, that each bank has its own approach.
4.33 When asked further about his understanding of a consultation process, Mr
Consulting implies that you are going to actively listen and
act upon people’s views. When banks go through the process of making a decision
like this—and each has its own way of doing things—they would necessarily speak
to their customers and weigh up the effects on their customers, and that would
be, as far as they are concerned, the most appropriate way of doing it. If you
introduce an element of strict consultation to the process, you may end up
dashing people’s hopes. So I think we would prefer to leave it as it is.
The banks are certainly aware of the importance to the community of consultation.
Mr Ian MacDonald, the National, told the Committee:
We have learned a lot from feedback from our own people and
from the communities and our customers that a longer period of consultation may
enable something to be done and at least forewarn people of what may be about
to happen. That has got to be taken on board.
We are certainly happy to commit to consultation.
Westpac provided the Committee with an example of the benefits of
consultation with the community which the Committee believes should stand as a
model for all ADIs when confronted with a situation where a local economy can
no longer support a full bank branch. It cited the case of Whitemark, Flinders
Island, where Westpac, because of a decline in the demand for its banking
services, decided to convert the existing branch to an In-store facility.
Following extensive consultation with the community including a town meeting,
the Regional Manager wrote to all local customers outlining the changes and
enclosing a voting slip for them to indicate whom they would prefer as the
proprietors of the proposed In-store facility. It stated that after the votes
were tallied and the proprietorship settled:
Work commenced shortly thereafter to construct an alternate
entrance to the existing post office and to fit out the premises with a Westpac
In-store. This provided a confidential environment away from the day to day
business of the Post Office.
In this case, the bank not only consulted with the community but worked
alongside it to find a satisfactory solution.
The Committee accepts that a code of practice cannot prescribe the
degree and extent of public consultation that banks should undertake when
deciding to downgrade their services. The code can, however, state
unequivocally that consultation will take place and it can in general terms
state that banks will in good faith facilitate the transition from one service
channel to another.
The Canadian Government recognised the importance of community
consultation by conferring on an independent regulatory body, the Financial
Consumer Agency, the discretion to convene a consultation if there were
concerns that a rural closure was taking place with insufficient consultation.
The Committee sees merit in this proposal as a sensible means of ensuring that banks
engage in direct and genuine consultation with their customers and the
community and believes it warrants serious consideration.
For the moment, however, the Committee strongly urges the banks to
incorporate into their branch closure protocol an undertaking to develop a
comprehensive community consultation program that would include open
discussions about the future services to be provided by the bank. Such a
program would be designed to keep the community informed about the bank’s
prospects and to involve them in planning for the longer term. It would ensure
that a full public review takes place before a branch is closed. Consultation
clearly means engaging the community before decisions are taken and should be
so stipulated in a branch closure protocol.
The transition period
Education and training
The undertaking contained in the branch closure protocol dealing with
the period following the announcement of the branch closure reads:
Where a bank gives notice of the closure of a rural or
remote branch, it will offer customers face to face education training and
assistance to help them adjust to changes in the way they access their banking
This clause is consistent with the Hawker report which recommended that
in the event of closing a branch, banks provide face-to-face education and
training for customers and the community in alternative forms of banking.
4.42 The Committee would prefer the protocol to be framed in terms that
provide greater certainty that customers will receive adequate training and
assistance in the use of alternative methods. The discussion on training for
electronic banking in chapter 13 and for older Australians in chapter 14
details the dissatisfaction with, and the inadequacies of, the current
education and training programs and underscores the need for improved education
In the light of the criticism about the commitment of the banks to
education and training, the Committee recommends that the provision include
some practical guidance for banks as to the measures they should adopt to
assist their customers adjust to new banking arrangements. Examples could
include making an officer available in the town for three months after the
closure to help customers use new service channels or putting in place a
toll-free dedicated help line for the sole purpose of offering assistance and
advice to customers who have lost the service of a bank branch (see
recommendations 17, 18 and 19).
The branch closure protocol should also contain a commitment by the banks to
maintain close liaison with community organisations particularly local councils
to ensure that on-going training and support is available.
Services available after branch closure
The undertaking in the bank branch closure protocol dealing with the
services to be made available after a branch closure reads:
The Hawker Report recommended in unequivocal terms that in the event of
closing a branch, banks be expected ‘to leave behind some form of
over-the-counter service that allows access to cash deposit and withdrawal
facilities for personal and small business customers’.
In part, the Government’s response agreed with this recommendation but added
the proviso ‘where viable’.
- Where it is commercially viable to do so, a bank closing a rural or
remote branch will ensure that ongoing face to face access is locally available
to its services, which provide cash deposit and cash withdrawal facilities for
personal and small business customers.
- Where it is not commercially viable for a bank closing a rural or remote
branch to provide local ongoing face to face services, which provide cash
deposit and cash withdrawal facilities for personal and small business
customers, the bank will inform its customers about accessing its alternative
The Branch Closure Protocol while broadly supporting the Hawker Report’s
recommendation adopted the approach taken by the Government and has clearly
placed the qualification ‘where it is commercially viable’ on the requirement
to provide face–to–face banking services.
The National Farmers Federation (NFF) was highly critical of the hazy
terms used in this undertaking. In particular, it maintained that the
requirement that face-to-face services be maintained only where ‘commercially
viable’ was vague and could really mean anything. It noted that there was no
guarantee that the bank would explore other options, including agencies or
co-located branches. Mr Michael Potter explained that the NFF would like more
certainty in that provision.
When asked about the meaning of the expression ‘commercial viability’,
Mr Bell conceded that there was an element of ‘open-endedness’ in the term
but that was the best the ABA could do in formulating the code.
The Committee understands that the phrase ‘where it is not commercially
viable’ is subject to wide interpretation and could provide a convenient escape
route for banks wishing to avoid the responsibility of having to provide
face-to-face access to its services. Nonetheless, the Committee is cautious
about imposing an unwarranted constraint on the ability of a bank to adjust to
changing circumstances by requiring it, regardless of the commercial
circumstances, to guarantee that some form of over-the-counter service be made
available. It accepts the qualification as it now stands in the closure
protocol but believes that safeguards must be in place to ensure that banks do
not leave their customers without assistance and guidance in finding a
satisfactory substitute for the loss of a branch service.
In this regard, the Committee has serious concerns about the second
part of this undertaking which covers circumstances where it is not
commercially viable for a bank to provide over-the-counter services in the
event of a branch closure. This undertaking stipulates that the bank ‘will
inform its customers about accessing its alternative services’. Firstly, the
undertaking is redundant in that the protocol already requires a bank to offer
its customers face-to-face education, training and assistance to help them
adjust to changes in the way they access their banking service. Presumably this
undertaking would include informing customers about using its alternative
services. Secondly, the use of the word ‘its’ is far too narrow. The Committee
believes that a bank withdrawing services from a community should not limit its
advice to the services it provides but should take a broader view of the
customers’ interests and inform customers and community organisations of the
full range of banking services available to the community.
Furthermore, the Committee believes that the banks have a responsibility
to work closely and actively with their customers and the community in finding
alternative solutions to the banking needs of the community. The Committee
recommends that this undertaking in the protocol be redrafted to stipulate that
in the event of a branch closure the relevant bank will cooperate fully with
the community to explore all possible options in working out an acceptable
banking alternative for the area.
Portability of accounts—costs associated
with transferring accounts
A few submissions noted what they believed to be significant
deficiencies in the protocol. The NFF was concerned about some omissions such
as provisions covering the costs of transferring an account from a branch that
has closed. It would like to see costs associated with switching accounts
reduced or waived. Mr Potter explained that it is certainly not the customer’s
fault that a branch is closing and ‘we would not like to see costs being
imposed upon the customer when that does occur’.
4.53 The Weddin Shire Council also expressed concerns that customers of a
closed branch often find they cannot easily transfer their accounts to one of
the remaining banks because of the need to pay fees for closing accounts and
transferring loans and mortgages.
Along similar lines, Councillor David Lykke, Barossa Council, stated:
When people attach themselves to a bank, and are financially
committed with a mortgage, overdraft or otherwise, there are penalties in place
if they want to get out of that bank. That kills off any effective competition.
While the Australian Competition and Consumer Commission (ACCC) has done
some work on switching or transaction costs for banking services, it recognised
that there has not been a lot of actual econometric work done, particularly in
Australia. Nonetheless, it assumes that switching costs are relatively high.
This assessment is based partly on anecdotal evidence and partly on
confidential information regarding churn accounts and estimated churning in
terms of a couple of hypothetical mergers. Overall, the ACCC was of the view
that unless some change is made, consumers who are forced to move from one bank
to another will face unreasonable costs.
It made the point, however, that it had not come across anything in terms of
the transaction or switching costs which runs foul of the trade practices
4.55 This matter of costs and charges was considered in the Hawker Report
which recommended that in the event of closing down or downgrading a branch
below agency status, banks waive any fees or penalties incurred relating to
early repayment of loans or closing of accounts.
The Government rejected this recommendation. In its response to the
Report, it stated that it did not believe that financial service providers
regularly charge customers fees for closing accounts other than where necessary
to recover the economic costs of breaking fixed deposit or loan contracts. It
...the nature of fixed term deposits and loans is such that
customers do not generally need to interact with the financial services
provider regularly and, therefore, would not need to close these accounts if a
nearby branch closed.
The Government accepts that as part of the normal commercial
arrangements between a financial service organisation and its customer, it may
be necessary to impose fees on customers to recover costs in the situation
where the closing of that account results in a breach of a loan contract.
Mr Richard Viney, who conducted the review of the Code of Banking
Practice, questioned the correctness of the Government’s response. He claimed
that it overlooked common business practices. He wrote:
...if the customer has to close the current overdraft account
and take that to another institution in order to maintain ready access for
daily banking purposes, it is highly likely that the willingness of the
transferee institution to provide an equivalent overdraft facility will be
dependent on the customer also transferring the fixed term deposits and
refinancing the housing loan, especially if the customer has considerable
equity in the house.
The ABA, however, saw no need to address this matter of costs and fees
associated with switching accounts. Representatives from the ABA told the
Committee they were not aware of fees and charges being imposed with closing
and opening accounts. Mr Carroll noted that with an account such as a term
deposit, there are ‘economic costs for breaking those loans’ adding that there
would be costs incurred but at the choice of the customer. Mr Bell also pointed
out that with an account that has a period to run there was no reason for the
customer not to maintain that term deposit with that bank.
Representatives from the ABA did not refer to the difficulty and costs involved
in unravelling a package of accounts held with the one bank. They preferred to
argue that the fixed rate facility and rates and term deposits can run to their
4.59 The Committee believes that transferring accounts is not as easy as
suggested by the banks. When it comes to branch closures, the Committee is of
the view that customers in country towns should not bear any cost or penalty in
switching accounts as a direct consequence of the closure of their local bank
In the context of branch closures, the costs of transferring or
renegotiating a mortgage are of particular concern to the Committee. According
to a number of witnesses, the matter of mortgage arrangements is a significant
obstacle to switching accounts. Mr Ian MacDonald, National Australia Bank, told
the Committee that the largest impost on any customer changing from one bank to
another is mortgage stamp duty.
Mr Gregory Gillett, Bendigo Bank, agreed. He stated that customers certainly
see the stamp duty costs as an imposition that can amount to thousands of
dollars for a medium-sized business.
4.61 Mr Gillett told the Committee that the Western Australian Government
took the view that in order to give community banks their best chance of
success, they would actually remove stamp duty on the transfer of the banking
business on mortgages and the like. The ABA explained further that this scheme is the Western Australian
Government’s Regional Bank Tax Relief Scheme which was introduced from 1
February 2003. According to the ABA, the scheme, which previously applied to
community banks, now ‘provides relief from debt taxes and stamp duty, on the
transfer of a mortgage or the refinancing of borrowings, when a customer
transfers bank accounts where it is the result of a branch closure in a
The ABA was not aware of any other State government schemes. Mr Samuel Smith,
Gladstone Community Development and Tourism Association, mentioned that the
BankSA offers an exemption of stamp duty on transfer of loans where there is
not a branch in that town.
Mr Bell indicated that circumstances covering transactions involving
mortgage establishment fees and early pay-out on a mortgage where the bank has
closed are not covered in the protocol and he would speak to his members about
Mr Ian MacDonald, National Australia Bank, suggested that it is a matter for
governments rather than banks.
In its response to the Hawker Inquiry, the Commonwealth Government
included advice from State and Territory governments regarding the charging of
stamp duty on refinanced loans. It shows that the various governments offer a
range of concessions or exemptions on stamp duty on mortgages (see appendix 3).
The Committee accepts that a customer living in a country town compelled
to transfer a mortgage because of the closure of a bank branch should not bear
the unnecessary and unfair imposition of paying stamp duty or other costs
associated with transferring a loan account. It notes the Government’s response
to the Hawker Inquiry that the States and Territories, at least partially, provide
exemptions from state duties. This information does not seem to accord with the
evidence before this Committee which indicated that stamp duty was a major cost
in transferring a mortgage from one financial institution to another. The
Committee believes that both the banking industry and the relevant state
governments should clearly identify the costs imposed on a customer
transferring a mortgage from one financial institution to another and consider
measures to remove such penalties where the costs derive directly from a branch
closure in a non-metropolitan town.
The Committee recommends that the State and Territory governments
and the banking industry work together to establish the exact costs to a
customer in transferring a loan from one institution to another as a direct
result of a branch closure in rural, regional and remote Australia. Further
that they introduce measures to exempt such customers from stamp duty and other
associated costs when transferring a loan to another financial institution as a
direct result of their bank closing a bank branch.
The Committee adheres strongly to the view that in the event of a branch
closure in a country town, customers of that bank should not bear any costs
when transferring accounts and most definitely not any cost, fee or charge of
an administrative nature.
The Committee recommends that in the event of a bank closing a
branch in a non metropolitan area and where another branch is not readily
accessible that the bank waive any fees or penalties incurred by a customer
closing an account, including a loan account, or transferring the account to
another institution as a result of the branch closing.
The Committee also recommends that the ABA incorporate this waiver
of transfer fees on closure of a branch into the Transaction Services and
Branch Closure Protocol.
Other disincentives to switching accounts
Aside from the regulatory cost with stamp duty and similar imposts,
customer surveys by the Bendigo Bank show the other key difficulty facing
customers in transferring accounts is ‘the rigmarole the bank makes them go
through in changing’.
4.67 The KPMG research report, Small Business Banking in Australia,
noted that there are costs to switching banks which apart from the time taken to
find a new supplier, include ‘risks that complex transactions may not be
transferred smoothly from one provider to another’. 
A number of witnesses cited instances where they believe the banks
frustrate the transfer of business to another service provider.
The Manilla Shire Council highlighted problems such as clients being unable to
transfer their money from the Post Office to their banking institution’s branch
because no pin numbers were supplied to clients by the particular banking
It maintained that these major financial institutions have not gone to the
trouble of educating their members regarding services that are available.
4.69 The costs, delays and effort involved in switching accounts also have
implications for service providers wishing to enter the market or expand their
services. This matter is taken up in the broader context of barriers to entry
which is discussed in chapter 8.
Apart from the costs associated with transferring a mortgage, the
general and anecdotal nature of the complaints about penalties incurred and
trouble experienced when switching an account makes it difficult for the
Committee to be specific in formulating any recommendations. Without doubt many
witnesses assumed that there are extra costs, fees and delays in switching
accounts from one provider to another.
The Committee believes that banks should expedite the transfer of
documents or information needed by a new provider. It recommends that the banks
incorporate in their protocol on branch closure a general undertaking that in
the event of a branch closure they will facilitate to the best of their ability
the transfer of a customer’s business from their institution to another should
the customer decide to switch allegiance.
Omissions from protocol
Notice before changing the branch that
manages the account
The protocol made no reference to the Hawker recommendation that banks
provide written notice of at least two months before changing the branch that
manages an account (Hawker recommendations nos. 3 and 20). The Government
responded to this recommendation by citing advice from the ABA which stated:
...the notion of accounts being domiciled at a particular
branch is outdated. Accounts are no longer managed by branches, but rather by
central processing houses that are responsible for all of the accounts held
with the financial service organisation. On this basis, the ABA advised that
providing information to customers about where information relating to their
account is held is irrelevant to the issue of branch closures.
Mr Richard Viney, who reviewed the banking code of practice, took issue
with this assessment which he thought was inaccurate. He maintained:
While it may be that accounts are no longer managed by
branches but rather by central processing houses, the fact remains that certain
records vital to customer access to their accounts are still kept in branches.
He cited in particular the account holder’s signature without which a
branch may refuse to process certain transactions and bank fee schedules which
differentiate the fee charging purposes between a service provided within the
home branch and the same service provided at the customer’s request at a
No mention of transferring accounts to another branch without notifying
the customer was made during the inquiry. Councillor Burgess did, however,
mention it in the context of possible branch closure. He told the Committee:
The other thing to remember is that some have tried to
manipulate bank closures and have not been successful. For example, the NAB
here in Jamestown moved major accounts into Clare. The people with the accounts
suddenly wondered what was going on and said: ‘Hang on. We want our accounts
moved back to Jamestown.’
The branch was still here but all of a sudden these people
started to notice that their accounts had ‘Clare’ on them and ‘ring this
number’ and they did not know why. They just rang up and asked why they were
now in Clare. They were told that they thought it would be more convenient as
it was a general branch or something. It was never said that they were going to
close, but you can only presume that that is what they were perhaps working
Similarly, the Weddin Shire Council suggested that banks manipulate
their viability by transferring business accounts or loans to larger regional
centres, and then claim that the branches were uneconomical to maintain.
The Committee believes that on courtesy grounds alone and in the
interest of promoting customer awareness banks should give prior notice of any
such intention to move accounts and the reasons for doing so. To the banks it
may be a simple and unimportant administrative arrangement but to customers it
is an important matter of being adequately informed about their banking
Community impact statement
Some submissions wanted the banks to adopt far more stringent procedures
for branch closures. The Rosalie Shire Council suggested that banks should be
required to substantiate their reasons for closing any branches in rural or
remote areas to the Banking Industry Ombudsman.
The Northern Areas Council recommended that where banks intend to close a rural
branch they should be required to prepare a community impact statement setting
out the effects of such action on the community. It also suggested that there
should be fee rebates for communities losing a bank branch.
The Finance Sector Union of Australia also believed that a community impact
statement should be part of this protocol.
The Committee sees merit in a bank preparing a community impact assessment
when withdrawing its services from a country town and recommends that such an
undertaking be incorporated in the branch closure protocol. Banks are uniquely
placed because of their expertise, knowledge of the customers and understanding
of the economic life of the community to facilitate the transition for
customers from one form of financial service provider to another. If adopted,
this procedure would make banks more accountable for their decisions and
provide vital information for all stakeholders involved—the bank, its customers
and the community it serves. It would provide a clear demonstration of the
bank’s awareness of the effects of its decision on its customers and provide a
solid base of information to help the community understand the economics behind
the decision and to plan more realistically for alternative arrangements. It
would promote informed debate and be the focal point for community
consultation. Such a statement would also provide a valuable start for
communities considering the range of options open to them as a substitute for
the loss of the branch.
The ABA does not support banks being required to prepare a community
interest statement when considering closing a bank.
The Committee, however, does not envisage any significant compliance costs
involved in publishing this information which is intended to inform customers
and the community about the reasoning behind the closure of the branch and for
replacing it with another means of delivering the service. The documentation
would come directly from the internal assessments conducted by the bank during
its decision-making process.
Amendments to the branch closure protocol
Notwithstanding the development of a protocol for the closure of bank
branches and assurances from the banks that they have adopted a more
consumer-sensitive approach to branch closures, many in the community remain
sceptical. They draw on strongly held impressions based on past experiences to
anticipate the future behaviour of banks. Mr Samuel Smith, Gladstone Community
Development and Tourism Association, encapsulated a view held widely in the
community about branch closures:
...the problem with the closure of banks in the country was
that the banks just pulled up their shingles overnight and then there was
nothing, and then local people and local businesses had to make arrangements to
do their banking, which usually then had to be out of town.
To the same effect, Councillor Burgess told the Committee:
...we have found that one of the biggest issues is that the
banks do not announce that they are going to pull out. They just seem to be
here one day and gone the next. Once, when they first started pulling out, they
would hold a public meeting and let the community know. There would be a bit of
hoo-ha, but eventually they would be gone a month or so later. At least then
there was a chance for a bit of training of people et cetera, but of late they
just seem to pull out overnight.
Thus, even if banks have mended their ways, the perception
of their disregard for communities is deeply ingrained.
Without doubt there is a high level of dissatisfaction with the closure
of bank branches in rural, regional and remote Australia and much residual
resentment. In noting the major criticisms of the current branch closure
protocol, the Committee makes the following recommendations in order to add to
and strengthen the various undertakings. In adopting the recommendations, the
Committee hopes that banks will take a more active and co-operative role in
assisting communities adjust to branch closures and to help communities arrive
at satisfactory alternatives.
The Committee recommends the following amendments to the Transaction
Services and Branch Closure Protocol—
The following clauses to be inserted:
- During any consideration by a bank to close a branch in a
rural or remote area or to significantly downgrade its services, it will
consult with customers and community organisations about the future of the
branch and the options being considered to substitute for the loss of services.
- Where a bank intends to close a rural or remote branch and
where that branch is the only branch in the town and the bank will not be able
to provide an over-the-counter facility offering adequate services for both
residents and local businesses, the bank will give a minimum of a six months
written notice prior to the closure to customers of the branch and community
organisations including local government.
- Where a bank gives notice of the closure of a rural or remote
branch, it will release a community impact statement. The intention is to
assist customers and the community understand the reasoning behind the closure
and to equip them with vital information necessary to make informed decisions
about measures that should be taken to ensure that the community has access to
adequate banking and financial services.
Protocol to be adopted following notification of closure:
- Section 1 (b) be amended to read—‘Where it is not commercially
viable for a bank closing a rural or remote branch to provide local ongoing
face-to-face services, which provide cash deposit and cash withdrawal
facilities for personal and small business customers:
A clause be inserted that makes a clear statement of intention
that a bank closing a branch will facilitate the transfer of accounts to
another institution of the customer’s choice. This undertaking to include the
timely and orderly transfer of information and documentation.
- the bank will consult with and inform its customers about
accessing alternative services;
- the bank will maintain close liaison with its customers by
ensuring that they have ready access to information and advice;
- the bank will work with its customers and community
organisations to facilitate the establishment of some form of banking service
for example through the RTC program or Australia Post.’
The Committee welcomes the announcement of a moratorium on branch
closures by a number of banks. It is mindful, however, of the many branches
that have closed their doors or downgraded their services over recent years and
the lasting impact that that has had on communities throughout regional, rural
and remote Australia.
4.85 Clearly, the banks have much ground to make up if they are to change
public opinion. The protocol as it stands does little to enhance their image.
The Committee has made a number of recommendations that would see the protocol
convey a stronger message that banks are aware of the adverse impacts that a
branch closure has on their customers and the community and that they have a
genuine commitment to serve their customers even in situations where commercial
imperatives require a branch closure.
The intention of the recommendations is also to ensure that communities
facing a branch closure are assisted by the bank to make the transition to a satisfactory
alternative without unnecessary delay, costs and upheaval. A branch closure
protocol may well help a community through a transition period. It cannot,
however, fully address the problems created by the withdrawal of a bank’s
4.87 The following part of the report analyses the provision of banking and
financial services in regional, rural and remote Australia. The emphasis is on
examining the various and different forms of delivery of banking and financial
services and determining the extent to which they are compensating for the loss
of bank branches and are meeting the needs of people living and working in
Part II - The provision of banking and financial services to rural, regional and remote Australia
Part I dealt with bank branch closures—the rate of decline,
the reasons and context of that decline, its effects on residents, local
businesses and the community and how banks manage branch closure.
Part II looks at the broader picture of the provision of
banking and financial services in regional, rural and remote Australia. It
comprises the following chapters:
Chapter 5 examines the effects of increased competition on
the banking industry in country Australia—it identifies some winners and
Chapter 6 provides an overview of the many and varied
channels now providing banking and financial services throughout country
Australia. It looks at APRA’s Points of Presence database and assesses its
usefulness as a tool to help understand the level and quality of banking and financial
service delivery in regional, rural and remote Australia.
Chapters 7–12 look respectively at the following specific
- shared banking and mobile banks;
- credit unions, building societies and community banks;
- agencies and post offices;
- Rural Transaction Centres;
- Automated Teller Machines (ATMs) and Electronic Funds
Transfer at Point of Sale (EFTPOS); and
- telephone and Internet banking.
Chapter 13 weighs up the advantages and disadvantages of
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