At a recent Senate Banking Inquiry I spoke with Michael Lawrence, Chief Executive Officer of the Customer Owned Banks Association.
I know that many of our supporters hold the belief that more regulation will bring the banks under control. The truth is that the banks will always have smarter lawyers than the government. Regulation becomes a barrier to entry of new or small players wanting to compete with the big banks. At the same time, the big banks do whatever they want with only the occasional penalty that is clearly not enough to stop them.
The answer to this dilemma is a Government-owned bank that provides the existing banks with real competition by running the bank for the benefit of the customers and shareholders equally, rather than entirely for the benefit of shareholders, as the banks are doing at the moment. The difference will be especially noticeable in the areas of customer service and ethics.
Suncorp is the 6th largest bank in Australia. It is on the market for a bargain price of $4.9 billion. My proposal is for the government to buy Suncorp Bank outright using the Future Fund and re-purpose it to provide the full range of banking services through Bank@Post.
This would offer real competition to the big banks. By running the Post Office Bank using a modified Code of Practice it guarantees the customer a bank that will not behave like greedy, immoral, profiteering crony capitalists.
That would be a refreshing change.
Transcript
Senator Roberts: Thank you, Mr Lawrence and Ms Elliott, for returning today. You made some comments about regulation, Mr Lawrence. Would less regulation lead to more competition and better service?
Mr Lawrence: We don’t advocate for less regulation, because we need to be regulated in the same manner as any bank. What we ask is that it be targeted at the objective. It needs to take into consideration business models. It needs to take into consideration the size and the complexity, rather than a broadbrush—Senator ROBERTS: Are the big four banks hiding behind excessive regulation that is really a barrier to entry for your smaller banks?
Mr Lawrence: I can’t speak for the big four banks. What I can say—
Senator Roberts: I am asking you for your opinion on the regulation of the big four banks, not to speak for the big four banks.
Mr Lawrence: The big four banks are facing the same regulation, but it gets magnified because of their size and complexity. They do have more resources to put towards that regulation and compliance. As I said, it comes back to the size of ours. You only have to go back to October 2021. In one month, we had design and distribution obligations land, we had open banking time lines to be met and we had three recommendations of the royal commission. If you are a customer-owned bank with 20, 50, 100 or 1,000 staff, that’s a significant amount of regulation that takes you away from focusing on your customer. It’s that proportionality.
Senator Roberts: Did you see my questioning of the CommBank chief executive, Mr Comyn, this morning?
Mr Lawrence: Yes, I did.
Senator Roberts: I put it to him that the regulations are a barrier to entry for anyone outside the big four banks.
Mr Lawrence: My opinion is that the complexity of regulation that we have today would be deemed to be somewhat of a barrier for new entrants.
Senator Roberts: I go to your letter which accompanied your submission. You say:
Solutions that help, not hurt
Two policy solutions canvassed by stakeholders—a Government-owned bank and a community service obligation—would be anti-competitive interventions detrimental to our sector’s ability to provide services for regional communities.
On page 10 of your submission you say:
The attractiveness of an Australia Post Bank with an explicit government guarantee for customer deposits would almost certainly reduce deposit flows to privately owned banks…
Are you aware that all bank deposits of COBA members are already covered by the government’s Financial Claims Scheme bank guarantee?
Mr Lawrence: Yes, they are covered.
Senator Roberts: Yes. It says so on your website. Are your words, then, an acknowledgement that the Financial Claims Scheme is underfunded and never likely to be used?
Mr Lawrence: I am aware of the Financial Claims Scheme. Do I think it will ever be used? I think if you look at the people who are funding it, they are not necessarily the ones that are at risk. It could well be used.
Senator Roberts: Could you explain that?
Mr Lawrence: I don’t have the list of everyone who is funding the Financial Claims Scheme, but there are organisations that aren’t as heavily regulated that could be the recipient.
Senator Roberts: Of the Financial Claims Scheme guarantee money?
Mr Lawrence: Not of the deposit guarantee, if that’s what you are referring to.
Senator Roberts: Yes; not of that?
Mr Lawrence: Not of that. To have a guarantee on deposits, you have to be an authorised deposit-taking institution, and therefore you are fully regulated.
Senator Roberts: The proposal One Nation has raised is to ask the Future Fund to purchase Suncorp bank and operate the bank commercially, under a modified Banking Code of Practice that guarantees face-to-face service, cash availability and the provision of service guarantee—a code you would be free to use as well. Then Suncorp could expand its services through Bank@Post. I note your objections to a government-owned bank and to Australia Post becoming a bank. Which, if any, of these objections would relate to the Suncorp proposal that I just outlined?
Mr Lawrence: We haven’t taken a position on the Suncorp merger, if that’s your question.
Senator Roberts: No. My proposal is for the Future Fund to purchase Suncorp bank and to operate the bank commercially, under a modified Banking Code of Practice.
Mr Lawrence: The question to us is?
Senator Roberts: Have you got any objections to that?
Ms Elliott: It is something we would need to consider. We have fantastic banks in Queensland ready to serve the public. We wouldn’t be looking for a government-backed intervention that would be to the detriment of the existing competitive market that involves customer-owned banks.
I’ve been locked out of MY account for contravening some ?law. As for banking I get an email from ING statingthey will stop me transacting on my account if I put THEIR requirements to the Grubament in jeopardy.
Senator, I fully agree that the Government needs to provide and alternative to the privately owned banks. The private banks have been reducing branches, ATM location number, and services provided for decades.
A few weeks ago in country Victoria I found towns with no bank, reasonable sized towns with no banking services. The local people were not happy and felt absolutely helpless when complaining to the banks.
One possibility as mentioned was to expand the services of the post offices to include some banking services. Obviously there would be many things to consider when implementing such an idea (security of staff being high on the list), but we have post offices in more locations than banks these days.
I think that you would find a great deal of community support with the ideas of a Government owned bank.
I agree with your proposal that we have a government owned bank. The dramatic change in customer service and loans which have occurred once the Commonwealth bank was privatised is astonishing, it equates with the wests treatment of its citizens after the fall of the Soviet Union. Your suggestion that the Federal Government buy Suncorp would be folly as a lot of the employees of the said bank moved into he banking position from their Insurance arm. and they are inculcated with a public service mindset , not forgetting that the insurance arm was the Queensland government owned State Government Insurance office. If you have ever done business with them you will understand my meaning.
Malcolm, why would anyone trust a bank where the govt was owning and controlling it ? Do we not have trouble enough with govts as it is ? Some clarification is probably needed here as the initial idea to me anyway seems fraught with danger !