Big banks to benefit from rural bank levy that will hurt consumers

Bank of Queensland has come out swinging against the proposed $350m rural bank levy, warning that it will harm consumers and entrench dominance of the Big Four banks.

Bank of Queensland’s Mount Pleasant branch was closed earlier this year.

Bank of Queensland has come out swinging against the government’s proposed $350m rural bank levy, saying it will harm consumers and entrench the dominance of large banks.

Speaking at the lender’s annual meeting in Brisbane on Tuesday, BOQ chairman Warwick Negus sought to reassure shareholders weeks after Treasury stunned the industry with the prospect of an annual $350m pot to keep branches in the bush open, even as he cautioned that the lender would be disproportionately affected by the levy if it went ahead as is.

“Recent media reports about a new bank levy have rightly concerned our shareholders. BOQ supports well-considered policies with thorough consultation that will support Australians, particularly those experiencing vulnerability and their unique need for both physical branches and access to cash,” Mr Negus said.

“However, the proposed levy as reported is inequitable and disproportionate, affecting mid-tier and international banks, potentially hindering competition, productivity and innovation. It contrasts with the government’s welcome competition and productivity initiatives.”

As well as hurting mid-tier banks such as BOQ, the levy would entrench larger banks’ dominance and harm consumers, Mr Negus warned. “As we understand it, this has not been announced as policy. We’ll continue to advocate for a comprehensive consultation to any proposal to support access to banking services in regional areas,” he said.

BOQ declined to say what the ultimate cost would be to the lender if the levy went ahead. The bank is part-way through its plan to acquire its 114 franchised businesses in a restructure that will see much of its branch network closed in the coming two years, as it looks to cut costs.

The bank is shifting to business banking and lending where it sees more favourable margins and returns. That comes against the backdrop of the bank cutting 400–600 roles across its operations as part of efforts to contain costs and simplify its structure.

Treasury blindsided the industry last month when it lobbed a proposal that would see lenders stump up hundreds of millions of dollars a year to keep rural branches open. Under the initial proposal, Bendigo Bank and NAB would emerge as major winners of the levy – Bendigo Bank could pocket as much as $200m of the $350m total, while NAB could benefit to the tune of $75m, under a redistribution model that would effectively be funded by their competitors.

Westpac would take the biggest hit, at a reported $100m, while Commonwealth Bank and Macquarie would have to stump up $75m each. ING would pay $60m, while ANZ and HSBC could each have to pay $20m.

Banks have pushed back, putting forward their own proposals, including greater support to Australia Post and its Bank@Post offering; that more lenders sign up to the moratorium on branch closures; and that each lender invest in its own network and provision of services, rather than contribute to a collective pot, The Australian understands.

While Commonwealth Bank is understood to support an industry-wide contribution to keep branches in the bush open, others are seeking alternative solutions, with a rift quickly emerging.

The major banks are split in part because of the perception that some are failing to pull their weight in supporting the regions.

Originally published as Big banks to benefit from rural bank levy that will hurt consumers