Chapter 1Introduction
Referral and conduct of the inquiry
1.1On 8 February 2023, the following matter was referred to the Rural and Regional Affairs and Transport References Committee for inquiry and report by 1 December 2023:
The current extent of bank closures in regional Australia, with reference to:
(a)the branch closure process, including the reasons given for closures;
(b)the economic and welfare impacts of branch closures on customers and regional communities;
(c)the effect of bank closures or the removal of face-to-face cash services on access to cash;
(d)the effectiveness of government banking statistics capturing and reporting regional service levels, including the Australian Prudential Regulation Authority's authorised deposit-taking institutions points of presence data;
(e)consideration of solutions; and
(f)any other related matters.
1.2On 14 September 2023, the Senate granted an extension of time to report to 16 May 2024. On 16 May 2024, the Senate granted a further extension of time to report until 24 May 2024.
1.3The committee advertised the inquiry on its website and invited submissions from stakeholders. Submissions originally closed on 28 April 2023. On 18 October 2023, the committee agreed to reopen submissions until29February 2024.
1.4Acknowledging the importance of the banking system to all Australians, the committee invited and received submissions from a wide range of individuals and organisations. This included every Australian owned authorised deposit‑taking institution (ADI) as at the commencement of the inquiry, Australian Government departments, state governments, financial industry associations, regional communities, advocacy bodies, First Nations organisations, universities, thinktanks, and unions.
1.5The committee received 609 submissions which are listed in Appendix 1 and published on the committee's website.
1.6The committee held 13 public hearings, as follows:
2 March 2023, Sale, Victoria—hearing from representatives of the banks and local councils;
17 May 2023, Cloncurry, Queensland—hearing from local councils, peak bodies, local businesses and community groups;
18 May 2023, Ingham, Queensland—a half-day hearing with banks, local councils and community groups;
15 August 2023, Carnamah, Western Australia—hearing from local councils and businesses;
16 August 2023, Beverley, Western Australia—hearing from banks, local councils, local businesses and community groups;
19 September 2023, Launceston, Tasmania—hearing from banks, local councils, and an open session for individuals to contribute;
20 September 2023, Canberra, ACT—hearing from banks, unions, the Australian Banking Association (ABA), and the Banking Code Compliance Committee;
21 September 2023, Junee, New South Wales—hearing from Beyond Bank, local councils, businesses and clubs;
1 December 2023, Canberra, ACT—hearing from post office bodies, regulatory agencies, government departments, and Indigenous financial and banking services organisations;
21 February 2024, Kingston SE, South Australia—hearing from local councils and businesses;
13 March 2024, Tom Price, Western Australia—hearing from local councils, Bankwest and community representatives;
25 March 2024, Canberra, ACT—hearing from the Australian Competition and Consumer Commission and the Reserve Bank of Australia (RBA); and
16 April 2024, Bribie Island, Queensland—hearing from local councils, post office licensees and community members.
1.7A list of the witnesses who provided evidence at the public hearings is available at Appendix 2.
Note on terminology
1.8Throughout this report, the committee uses both the term 'banks' and the term 'authorised deposit‑taking institutions' or 'ADIs'. The term 'ADIs' is more accurate and inclusive, as not all deposit-taking institutions are 'banks'. However, in line with popular usage, and for convenience, the committee regularly uses the term 'banks' throughout the report.
Acknowledgment
1.9The committee thanks all contributors to the inquiry, including those individuals and organisations who made submissions, gave evidence at public hearings, and provided responses to questions on notice. The committee especially thanks members of the public who offered their personal stories with courage and generosity.
Structure of the report
1.10This report examines bank closures in regional Australia across five chapters:
Chapter 1—Introduces the inquiry, including its conduct and structure, background on bank closures in regional areas and branch presence, the committee's letter to the banks, and a summary of relevant previous inquiries.
Chapter 2—Establishes the importance of cash and financial services in regional areas, including issues with digital banking, barriers to access in remote and Indigenous communities, and outlines the impacts of branch closures on individuals, communities and businesses.
Chapter 3—Examines branch closures: why and how are branches being closed; what are the rules and processes, and what are the impacts.
Chapter 4—Outlines possible solutions to the regional banking crisis, including remote service options, a public bank or PostBank, expanding Bank@Post, and options for stronger regulation.
Chapter 5—Protecting the future of regional banking—establishes the need for reform and provides the committee's conclusions and recommendations.
Background
1.11Banks are closing branches all over Australia and have been for decades. Representatives from the Australian Prudential Regulation Authority (APRA) stated that over 2100 bank branches closed in the last six years, from 2017 to 2023, equating to a reduction of almost 40 per cent of branches in metropolitan areas, and 35percent of branches in regional Australia. In addition to branch closures, there has been a reduction in the provision of automatic teller machines (ATMs) of 60 per cent, including the loss of half of the ATMs in regional and remote areas.
1.12When banks close their branches in regional areas, the impact on individuals and communities can be devastating and far-reaching, especially when it is the last bank in town. This section outlines bank branch points of presence data and branch presence in rural and regional areas. It also considers issues raised with data collection.
Branch presence in rural and regional areas
1.13APRA collects and releases detailed data on the number and location of bank branches and other points of presence (PoP) on an annual basis. APRA's PoP statistics from 2016–17 to 2021–22 show declines across both the branch level of service and other face‑to‑face categories in the inner and outer regional and remote, and very remote areas, combined. In the branch level of service category:
bank presence declined 28.7 per cent from 2016–17 to 2021–22 across the four regional and remote areas, from 2359 branches to 1682;
the very remote area saw the biggest decrease in percentage terms, recording a 7.7 per cent decrease on average each year, driven largely by a 30.6 per cent decrease between 2017–18 and 2018–19; and
in nominal terms the biggest decrease was in the inner regional area from 1320 in 2016–17 to 965 in 2021–22, or a decrease of 355.
1.14In the other face-to-face category:
there was a 6.3 per cent decrease from 2016–17 to 2021–22 across the four regional and remote areas, from 2639 to 2473;
the inner regional area saw the biggest decrease in percentage terms, recording a 1.4 per cent decrease on average each year, driven largely by a 9.4 per cent decrease between 2018–19 and 2019–20; and
in nominal terms the biggest decrease was also in the inner regional area from 1271 in 2016–17 to 1117 in 2021–22, or a decrease of 94.
Figure 1.1Branch level of service by remoteness area (incl. cities), 2016–17 to 2021–22
Source: APRA points of presence data, 19 October 2022 for figures; Regional and Rural Affairs and Transport Committee secretariat for chart and calculations. Note: The 'other' remoteness area recorded zero figures in all years and has been excluded.
Figure 1.2Branch level of service by remoteness area (excl. cities), 2016–17 to 2021–22
Source: APRA points of presence data, 19 October 2022 for figures; Regional and Rural Affairs and Transport Committee secretariat for chart and calculations. Note: The 'other' remoteness area recorded zero figures in all years and has been excluded.
Figure 1.3Other face-to-face by remoteness area (excl. cities), 2016 –17 to 2021–22
Source: APRA points of presence data, 19 October 2022 for figures; Regional and Rural Affairs and Transport Committee secretariat for chart and calculations. Note: 'Other face-to-face' points of presence provide face-to-face services and maintain a fixed address, but do not meet all of the minimum branch requirements.
1.15In their joint submission to the inquiry, independent journalist at The Regional, MsDaleWebster, and retail banking financial analyst, Mr Martin North, provided stark statistics of branch decline in regional areas:
141 towns that once had one or more major banks now only have a franchise and/or mutual bank;
28 towns that once had one or more major banks now have only a minor corporate bank and, in a few cases, a community-funded option;
596 towns that once had one or more major banks have no form of bank at all; and
259 of the towns that have no banks at all have lost two or more big four banks.
1.16Ms Webster added that of all the banks:
[Australia and New Zealand Banking Group Limited (ANZ)] now has the smallest regional bank network in Australia with just 175 of its original 615branches outside metropolitan cities still open, a cut of 71.5 per cent.
[Westpac Banking Corporation] (Westpac) has the second smallest regional footprint after slashing 76 per cent of non-metropolitan branches, leaving it with 186 from its original 777.
National Australia Bank has 277 regional branches still open but has closed (or cut services to a point where the facility is no longer classified a bank branch) 483 locations. This is a cut of 63.5 per cent of its original regional network of 760.
Commonwealth Bank was for some time the only one of the 'big four' that still has more regional branches open than it has closed, but that has now changed with some particularly cruel cuts in 2021–22. Of its original 650branches, 320 remain open, a 51 per cent reduction. The Commonwealth's most recent closures in places such as The Entrance, Port Fairy, St Marys, Umina Beach, Junee, Tewantin and Toormina have left these towns with no corporate banking services at all.
1.17The RBA submitted that, as at June 2022, 95 per cent of the population lived within 10.7 km of a bank branch:
Figure 1.4Distance to Bank Branches, 2022 data
Source: Reserve Bank of Australia, response to questions taken on notice, 1 December 2023 (received 15December2023), p. 5. Caption: ADI Branches in the APRA Points of Presence collection, 2022.
1.18However, further closures in 2022, 2023 and 2024 will have altered this percentage. Ms Webster submitted that another 104 branches closed in 2022 and 72 branches closed in 2023, compounding the already dire situation for regional communities:
According to the branch lists of the big four's founding banks at the peak of the modern network, there were (minus some double ups due to mergers around this period) 2802 banks in 1126 regional locations in Australia in 1975. Of those, just 958 remain open by March 2023*—a cut of 66 per cent of the network or a loss of 1844 banks in 1031 regional towns, cities and coastal communities in just over 45 years.
Branch closure data
1.19APRA began collecting ADI PoP data following recommendations made in the House of Representatives Standing Committee on Economics, Finance and Public Administration's report, tabled in 2000, entitled Review of the Australian Prudential Regulation Authority: Who will Guard the Guardians?.The report recommended that APRA provide annual statistics including the location and level of face-to-face banking in Australia.
1.20APRA's PoP data collection encompasses four types of physical service channels: face-to-face points of presence offering a branch level of service; other face-to-face points of presence; ATMs; and Electronic Funds Transfer at Point of Sale (EFTPOS) machines. APRA defines each service in the following way:
Face-to-face points of presence must provide face-to-face services and maintain a fixed address (i.e. do not include mobile lenders or travelling employees). They are categorised as either a branch or other face-to-face point of presence based on whether they meet APRA's minimum branch requirements.
Other face-to-face points of presence provide face-to-face services and maintain a fixed address, but do not meet all of the minimum branch requirements.
ATM points of presence are terminals allowing a cardholder to withdraw cash from an account. This can include ATMs and Cash Dispensers (CDs). Where the terminal is an ATM, it will also provide access to a range of other services including balance inquiry, transfer of funds, and acceptance of deposits. Authorisation is via a Personal Identification Number (PIN). Access is unassisted and may be 24 hours per day, depending on the terminal's location.
EFTPOS points of presence are terminals located at retail outlets which enable a cardholder to purchase goods and services using either deposit or credit funds and may also enable cash withdrawals using deposit funds. Authorisation may be via a PIN or contactless payment. Access is with the assistance of the retailer and is therefore restricted to the operating hours of the retail outlet.
1.21For the purposes of data collection, APRA defines a 'branch' as a face-to-face point of presence that meets the following minimum criteria:
accept[s] cash and other deposits (including business deposits) and provide change;
facilitate[s] the keeping of accounts for customer access, including the provision of account balances;
open and close accounts;
can facilitate or arrange the assessment of the credit risk of existing and potential customers; and
offer[s] additional services in the one establishment such as financial services, business banking and specialist lending.
1.22When considering the data in terms of regional and rural accessibility it is important to note that Bank@Post services are captured in the 'other face-to-face points of presence' category.
1.23The accuracy of APRA's PoP data has been disputed. Ms Webster has previously reported that the data has included branches that do not provide services listed in APRA's definition of a branch, are no longer full service, or are outlets that include services that are linked to banks but are not deposit-taking:
Despite never having met [the branch criteria] requirement however, Rural Bank (under Bendigo and Adelaide Bank since 2019) and Rabobank have been counted as full-service retail banks in more than 340 regional sites across regional Australia since being listed in the APRA database, which in Rural Bank's case was nearly 20 years ago. Rabobank is also recorded twice (as a foreign bank and branch) in the 54 regional towns in which it has a presence, while the Westpac network has included mortgage brokers that have links to the bank.
1.24Ms Webster argued that the above mistakes have skewed historical data. Following questioning by the Senate Economics Legislation Committee at Budget Estimates 2022–23, APRA confirmed that 'a number of historical data resubmissions were made by ADIs and duly published in the June 2021 edition of the Points of Presence'. On 19 October 2022, APRA released the 2022 data with an 'important notice', declaring that:
This edition of ADIs' points of presence contains revised data to the historical periods due to resubmissions from entities. The following data are identified as significant revisions to previously released data.
Cooperative Rabobank U.A. and Rabobank Australia Limited revised all their service channels from Branch to Other face-to-face in correcting classification error in their initial submissions from June 2017 to June2021.
The Hongkong and Shanghai Banking Corporation [(HSBC)] Limited revised all its service channels from Branch to Other face-to-face in correcting classification error in its initial submissions from June 2020 to June 2021.
1.25Ms Webster was further concerned that the APRA data is 'useless' for journalists. It does not outline which bank is in which town, meaning banks can 'mask their footprint', and it is confusing to interpret and use. A key problem, according to Ms Webster, is around the definition of what a branch is:
When you take tellers and cash service out of a bank, which ANZ and [National Australia Bank] are doing—I think the others are starting—and they become cashless banks—one journalist the other day was asking me about fake banks, and I think that's probably a really good term to describe them—it gets really complicated. So APRA can't actually tell you. If you ask them later this morning or this afternoon how many banks closed in Australia last year, which was the job it was given 20 years ago by an inquiry similar to yours, they can't answer truthfully. They don't know.
1.26APRA was asked about the quality of its data collection during the inquiry. Executive Board Member, MrsTherese McCarthy Hockey stated that she believes the quality of data is improving, though it does rely on the banks submitting accurate data. Mrs McCarthy Hockey also confirmed that APRA's PoP data does not currently take into account the opening hours of a branch, and that APRA is currently reviewing its PoP data to ensure it better meets the needs of stakeholders.
Committee letter to the banks
1.27At the commencement of the inquiry, the committee wrote to around 76 of Australia's ADIs to 'respectfully ask that [they] postpone any further closures of regional branches until the conclusion of the inquiry'.
1.28The Commonwealth Bank of Australia (CBA) responded swiftly to the committee's request, pausing the planned closure of branches in Bright, Victoria, and Junee, NSW, and committing not to close any regional branches in 2023. In his opening statement at a public hearing in Canberra on 20 September 2023, CEO of CBA Mr Matt Comyn also announced a decision to 'pause all CBA regional branch closures until the end of 2026'.
1.29However, Ms Webster accused CBA of 'bending the rules' by defining its Nerang branch on the Gold Coast as metropolitan, instead of regional, before closing it on 26 May 2023.
1.30The committee received formal responses from a number of smaller ADIs and published three responses on its website—National Australia Bank (NAB), ANZ and Westpac.
1.31NAB refused the committee's request to pause regional closures, saying the bank would 'be continuing [its] branch reshaping process during the Committee's deliberations in 2023, which will include closures, consolidations and new investments to meet our customers' needs'.
1.32ANZ agreed to 'postpone announcing any further closures of regional branches until the conclusion of the inquiry in December' [2023, the original tabling date]. However, it noted that 14 regional branch closures had been 'announced in 2022 and are now almost complete'. ANZ said it would continue with these closures, as pausing them would be 'more disruptive to [its] customers and staff than completing them as planned'.
1.33Westpac agreed to 'postpone eight regional branch closures that were announced in February 2023' and make no 'further decisions on regional branch closures' while the bank engages with the inquiry. However, Westpac also told the committee it will be 'continuing with [its] publicly announced branch co‑location program', which is to allow the bank to 'invest and stay in communities and have been well received by customers in more than 30 locations'.
Previous inquiries
1.34This inquiry is the latest in a long line of inquiries and investigations into the behaviour of Australia's banks in relation to closing branches. There have been numerous Parliamentary and independent inquiries into the financial sector and regional accessibility. Key reports and findings are detailed below.
1999 House of Representatives Standing Committee on Economics, Finance and Public Administration report
1.35On 22 March 1999, the House of Representatives Standing Committee on Economics, Finance and Public Administration tabled its report entitled, Regional banking services: Money too far away. The inquiry was prompted by the 1997 Wallis Inquiry which described a changing financial landscape in which high cost services and delivery mechanisms would be rationalised due to increased focusses on efficiency. The committee made 21 recommendations in its report.
1.36Recommendation 2 of the report suggested that the Minister for Regional Services, Territories and Local Government and the Minister for Financial Services and Regulation, in consultation with state and territory colleagues, 'undertake a collection of comprehensive data on the access communities have to financial services'. As a result of this recommendation, APRA began collecting points of presence data in June 2001.
2004 Money Matters in the Bush
1.37On 15 January 2004, the Parliamentary Joint Committee on Corporations and Financial Services tabled its report into the Level of Banking and Financial Services in Rural, Regional and Remote Areas of Australia. The report contained 33 recommendations aimed at improving competition in the retail banking industry, strengthening consumer protection, and encouraging the financial services sector to act responsibly in promoting the economic welfare of communities in rural and regional Australia.
1.38In its summary, the committee concluded that ADIs have a social responsibility to ensure that the communities they serve are provided with adequate services, and that there should be measures in place to ensure that institutions behave appropriately. Among other things, the committee recommended that:
in the event of a bank closing a branch where another branch is not readily accessible, the bank waive any fees or penalties incurred by a customer closing an account;
banks consult with customers and the community when closing a branch to discuss options being considered to substitute for the loss of services;
banks give notice of the closure of a rural or remote branch and release a community impact statement;
banks implement measures to minimise the penalties imposed on their customers living in areas where they have no option but to use a foreign ATM; and
banks allow sufficient time for people to experiment with and become accustomed to new technology and implement strategies to entice older Australians to use modern technology when banking.
1.39There is further discussion of the 'Money Matters in the Bush' inquiry throughout this report.
2019 Royal Commission into Misconduct in the Banking Superannuation and Financial Services Industry
1.40On 4 February 2019, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Commission) tabled its final report. The Commission was tasked with inquiring into, and reporting on, any misconduct by financial service entities and whether business practices by those entities fell below community standards and expectations.
1.41In considering access to banking services, the Commission noted that:
Not all Australians have the same access to telephone or internet banking. Not all Australians can 'step into the nearest branch' to sort out some issue that has emerged … For some Australians, these characteristics arise from living in a regional or remote location. As I said in the Interim Report, at 30 June 2017, about 28% of the Australian population lived in regional or remote areas. This is nearly 7 million people. At the same time, only 4% of all branches of ADIs and 2% of ATMs were located in areas classified as remote or very remote. The banks' branch networks have been shrinking for some years.
1.42The Commission went on to recommend that the ABA should amend the Banking Code 'to provide that banks will work with customers who live in remote areas or who are not adept in using English to identify a suitable way for those customers to access and undertake their banking’. This recommendation was supported by the Government in its response to the Commission.
2022 Final Report of the Regional Banking Taskforce
1.43On 21 October 2021, the Regional Banking Taskforce was established to bring banks and other stakeholders together to analyse trends in bank closures in regional Australia, assess the impacts of branch closures, assess how banks transition their services before and after closure, and identify alternatives to bank branch models that would maintain or improve banking services and accessibility. The taskforce released its final report on 22 September 2022.
1.44The Taskforce was made up of representatives from banks, including ANZ, CBA, NAB and Westpac, among others; peak bodies, including the ABA, the Customer Owned Banking Association (COBA), the Council of Small Business Organisations Australia and the Australian Chamber of Commerce and Industry; Australia Post; and the Australian Local Government Association. Over 400 submissions were received and meetings were held in Sydney, Orange, Mildura and Canberra to hear and discuss how bank branch closures have impacted individuals and regional communities.
1.45In its final report, the taskforce listed some of its key findings:
banks can do more to communicate and consult with individuals and communities when closing a regional branch;
when branches do close, alternatives like Bank@Post can assist to maintain banking services;
it is important to maintain access to cash, which is crucial for many in regional Australia;
people experiencing vulnerability face particular challenges and need support in accessing banking services;
continuing to support digital connectivity and literacy will help regional customers to access banking services; and
it is important to have data to monitor and understand the transition to alternative ways of providing banking services.
1.46Changes made to closure processes as a result of the Taskforce are considered in detail later in this report.