Sweeping new rules to come into force as Australian Banking Association reveals scale of branch closures

Tough new rules are coming into effect for Australian banks, as the peak trading association for banking reveals the huge scale of branch closures across the country.

New rules are being imposed on banks across the country as branches continue to shut down amid an accelerating “digital revolution”.

The Australian Banking Association’s (ABA) new Branch Closure Support Protocol will be in force from July 1 and comes after more than 1600 Australian bank branches closed between 2017 and 2022.

Just under 99 per cent of all customer interactions with banks now occur digitally, according to the ABA.

The protocol will govern the steps banks must follow when closing branches, such as providing customer support when the closest branch is at least 10km away, half the current threshold of 20km.

More than 20 banks are signed up to the Protocol, including the big four, Bank of Queensland and Bendigo Bank.

More than 20 banks are signed up to the new protocols, including the big four. Picture: NCA NewsWire / Damian Shaw

Notably, there are no requirements to consult the community prior to a closure nor to raise the threshold for when a branch can be closed.

ABA chief executive Anna Bligh said branch usage has been in “sharp decline for many years”.

“While overall customer preferences have shifted to digital, Australian banks know that some will need greater assistance during this transition,” she said.

The Rural and Regional Affairs and Transport References Committee initiated an inquiry into bank closures in regional Australia on February 8, 2023.

At the committee’s first hearing in March the Finance Sector Union (FSU) accused banks of closing branches, particularly those in regional areas, to suit their own business models.

The union rejected suggestions put forward by the banks that customer preferences for digital banking were driving the closures, arguing there are many Australians who are unable to transition to online banking.

Under the new rules banks are required to provide customer support when the next branch is at least 10km away, half the current threshold of 20km. Picture: Facebook

The union said those with disabilities, low digital literacy and the elderly would be disproportionately impacted, as would small business customers and Indigenous customers in remote communities.

The Protocol’s new Customer Care Standard, announced on Friday, will require banks to offer education and assistance to customers of a closing branch to transition to other banking options.

Banks will also have to provide language support where appropriate and provide additional assistance to vulnerable customers, such as older Australians and those with disabilities.

Key local stakeholders such as local government and community representatives must also be notified of closures while support obligations will no longer be limited to regional branches.

Unions say bank branches provide essential services, particularly for regional and vulnerable communities. Picture: NCA NewsWire / Dan Peled

While Ms Bligh conceded branches nationwide have decreased over the past 20 years, she emphasised Australia also has a higher branch density (24 branches per 100,000 adults) than comparable OECD countries, such as New Zealand.

The FSU considers in-person banking to be an essential service that many small businesses, Indigenous customers and vulnerable populations rely on.

The Protocol follows recommendations made from last year’s Regional Banking Taskforce while the federal government is due to deliver its report on regional branch closures on December 1, 2023.

Originally published as Sweeping new rules to come into force as Australian Banking Association reveals scale of branch closures