Australian banks would have to meet a minimum level of service in regional areas or contribute funding to bolster the number of branches and ATMs offered by other institutions, in a proposal put forward by Treasury.
According to a confidential report sent to bankers this week, seen by Guardian Australia, Treasury has outlined two proposals to better support the presence of in-person branches and ATMs.
One was a community service obligation, with a “baseline” of minimum services and expenditure for banks according to their service level and market size. If this cannot be met, banks could offset their “deficit” by funding services for other institutions.
“Alternatively, banks that have not met the floor or baseline of obligations could purchase credits that other banks have earned through providing above the required level of services,” the report said.
Preliminary analysis included with the report showed that the major banks – excluding NAB – and digital banks would not meet the baseline and would need to provide funding under the redistribution model.
The second option was a mandatory bank branch closure code – informed by a UK model, which builds on banks’ obligations to ensure community access to services and consider the impact of closures – with Treasury suggesting both options could be implemented.
“We’re always looking for ways to ease pressure on people and it’s no secret that the decline of banking services in rural and regional areas is a challenge for many Australians,” a Treasury spokesperson told Guardian Australia.
“The Treasury regularly engages with banks on important issues like this, and it would be unusual if they weren’t having discussions about the future of regional banking.”
The new report follows a Senate inquiry that began in 2023, and the 2022 regional banking taskforce, which “highlighted deficiencies in branch closure processes” including a lack of understanding “of the harm to particular cohorts of the community”.
Branch closures had “notable economic flow-on effects to regional areas”, the report found, meaning “detrimental” impacts were “not limited to customers of the particular branch”.
According to the Australian Banking Association, 99.1% of banking interactions are made online or through mobile apps. The report stated that older Australians, people with disability and First Nations communities are more reliant on in-person services.
Treasury’s report stated it was not aiming to reverse branch or ATM closures that have already occurred but seeks “better distribution and coordination of in-person banking services”, and the access to cash, as Australia “continues on a digital transformation”.
after newsletter promotion
Between June 2017 and June 2024, there was a 41% decline in the number of branches across the country, including a 36% drop in regional and remote areas, according to the Australian Prudential Regulation Authority. The majority of branch closures were from the four major banks.
The decline in 2024 wasn’t as sharp as previous years, after moratoriums on branch closures were announced. Westpac and ANZ have moratoriums until 2027, while CBA has one until the end of 2026.
The report noted branch closures had led to a shift in responsibility and cost to Australia Post’s Bank@Post service to “maintain adequate access to cash and in-person banking services in the regions”.
But it went on to note the service was “not sufficient on its own to support access to in-person banking services, and provides a more limited suite of banking services than traditional branches”.
In August, Australia Post reported a pre-tax loss of $88.5m. CEO Paul Graham said an increase in cash withdrawals through Bank@Post had put stress on the company, especially in locations without bank branches where it is the only provider.
“We didn’t anticipate the growth in that area when we first did our Bank@Post agreements with the three major banks, Commonwealth, NAB and Westpac,” he previously told Guardian Australia.