Armaguard concerns: banks secure ACCC permission to plan for cash crash amid Armaguard concerns

Australia’s biggest cash users have stepped up planning for the potential failure of Armaguard after a $26m rescue deal fell through.

Australia’s big banks have started planning for the potential failure of the country’s largest cash distributor after securing permission from the competition regulator over the Easter break.

The move, spearheaded by the Australian Banking Association, will see a consortium of cash users and banks prepare contingency plans in the event of Armaguard’s failure.

Armaguard, the distributor of 90 per cent of notes and coins in Australia, has warned it is in financial peril amid a cratering in cash use.

The group argues its planning is necessary to avoid a run on cash as well as removing the need for urgent government intervention.

The banking industry, as well as key supermarkets, Australia Post, and government departments had prepared a $26m rescue plan for Armaguard, in a bid to plug holes in the company’s balance sheet.

But the Linfox-owned cash distribution company rejected the deal last week, citing plans to renegotiate its existing deals with key customers in a bid to put the business on an even footing.

The Linfox group has also moved to extend funding for Armaguard, taking its financial support beyond the original April 2 deadline.

In response, the banking sector rushed to the ACCC to secure an authorisation allowing them to plan for Armaguard’s potential failure

The application, made on March 27, sought permissions to develop business continuing plans “to be followed in the event of (or in the reasonable anticipation of) a suspension, disruption, exit or partial exit of Armaguard to support the continued and safe distribution and availability of cash to businesses and consumers”.

The planning panel will see the ABA joined by the Reserve Bank of Australia, which will chair the group, as well as Treasury, Australian Payments Network, Coles, Woolworths, Wesfarmers, the Royal Australian Mint, Bendigo Bank, and Australia Post.

The ACCC told the cash working group on Friday they could share information and discuss contingency plans “in the event of, or in reasonable anticipation of, a suspension, disruption or exit of Armaguard’s cash-in transit services”.

But the ACCC imposed a series of conditions on the group, including monthly reporting requirements to the regulator, starting April 15.

The ACCC said it was granting the authorisation in large part due to its concerns about cash supply to regional and remote parts of Australia “many of which do not have access to cash banking services and rely on other means for accessing cash”.

“The RBA has identified that cash remains an important means of payment for some consumers and high cash users are more likely to live in regional areas,” the ACCC said.

“The ACCC considers the conditions are necessary to address these issues.”

Armaguard has been contacted for comment.

Originally published as Armaguard concerns: banks secure ACCC permission to plan for cash crash amid Armaguard concerns