Why are the banks closing their branches?

Ross Greenwood speaks to Former Standing Committee on Economics member and member for Page Kevin Hogan about the implications of more than 200 Bankwest staff will lose their jobs as dozens of branches are closed along Australia’s east coast.

Interview with: Kevin Hogan, Member for Page,

Ross Greenwood: Welcome back to Money News right around the country. I told you a couple of times tonight that Bankwest has announced it will close some 29 branches on the east coast of Australia. It will cost around 220 jobs. Now, it is 11 years ago when Bankwest, that was then independent of the Commonwealth Bank, announced it was going to spend some $386 million at the time to open 160 branches on the East Coast to challenge the monopoly of the big four banks. But what happened was that Bankwest with its owner HBOS, Halifax Bank of Scotland, got into terrible trouble in the global financial crisis. And so Bankwest was sold out to the Commonwealth Bank at the historically cheap price of just $2.1 billion.

Many of those openings of those new branches never went ahead, but still, Bankwest had a pretty good footprint on the East Coast, until today. As we told you last night on the program when somebody rang us and tipped us off that this was on, Bankwest today announced the closure of 29 of its branches on the East Coast. Now, the other point also is that, for the very first time with bank closures, because we’ve seen a number of them over the past year or so, mostly in regional areas. So that’s left a lot of farming communities and others without bank branches there. This hits the hearts of our cities. So say for example in New South Wales, you got places like Randwick, you got Bondi Junction, Top Bride, you’ve got Blacktown, you’ve got Bankstown, you’ve got North Sydney, Miranda, Mount Druitt, Chatswood, Castle Hill, Hornsby, East Gardens, Burwood, Penrith, Wigham all like Haven, all closed.

You go into Queensland, you got Carendale, you’ve got Chermside, you’ve got Indooroopilly, Mount Ommaney, you’ve got Loganholme, all of them closing. It will end up leaving just five branches for Bankwest in New South Wales, five in Victoria, one in South Australia in Adelaide, three in Queensland. So is this the trim? Because what Bankwest also has said today, this was kind of an interesting thing that I observed, is that they’ve seen an 88% rise in their mobile phone app log ins over the past three years, may we shouldn’t be surprised.

Kevin Hogan is the federal member for Page, and he was on the house of representatives standing economics committee that grilled the banks over a period of time over bank closures, both in regional areas, but as we see now, increasingly in the city. Many thanks for your time, Kevin.

Kevin Hogan: Thank good, Ross, how are you?

Ross Greenwood: Very well, thank you. Did you ever buy really the excuses that banks gave when you were on that house of representatives committee in regards to bank closures?

Kevin Hogan: No, Ross, I didn’t. And I always found and I know because I do talk to them regularly, so it was always very difficult to pin them down to specific answers. And there were 2 issues I was concerned with. You talk about the branch closures, and you link it back almost as we said that they got bought out by the Commonwealth Bank, and this was all due to state the global financial crisis-related, and we saw a drastic reduction in competition in our financial industries post that period, and we’re still seeing ramifications of that.

But not only am I concerned about branch closures. We saw, about 6 or 12 months ago, we saw that for customers it can be good where banks aren’t going to charge to use another bank’s ATM machine. And in some rural communities, it might be only, there might only be one or two ATM machine in a community, now, they don’t charge, or banks compete bank, if you like, piggyback off other bank’s ATMs. They’re not encouraged to leave them or put them there.

So I’m watching very closely if banks start pulling out there ATMs sometimes when there’s only one ATM.

Ross Greenwood: My gut feeling is that, that’s so obvious, Kevin, that that will happen. If all of a sudden they all decide that they’re going to share the ATM system, that’ll put one ATM in a town or maybe two in a slightly larger town, and heaven help you if suddenly that ATM or the technology goes down because there won’t be any choice around the place. But then I wonder whether the same thing might also be happening in the banking sector, because Bankwest in announcing this bank closures today said that customers could avail themselves of the Commonwealth Bank’s facilities. Now, I take that because Bankwest is owned by the Commonwealth Bank. But I also then made the other observation that they could use the services of Australia Post.

Now, Australia Post has banking facilitation services though it’s not an official bank itself. So I just wonder whether many have decided that they can cut their costs and simply throw the burden back on to the government and Australia Post service?

Kevin Hogan: Well, Ross, they obviously are, and they obviously have. I mean, we’ve seen that obviously with the branch structure, Australia Post is sometimes now the only option in smaller communities, so they’re doing that. But, look, we’re watching the figures with ATMs very closely, because there’s one thing about a small community losing a branch, I mean, that’s bad enough, but we do have other banks, Bendigo is one example, is a good one. Where they’re starting to come in to some rural communities.

They have a formula with the population size et cetera, et cetera, where they have filled some of that vacuum. But more of an issue I think is the one you just mentioned, if there’s only one ATM or two ATM machines in a village or a town, there’s no motivation now that they can charge other bank customers a fee. That would be devastating to a community. As you said, that cost shouldn’t necessarily be pushed on to Australia Post.

Ross Greenwood: There’s one other aspect also, is that we have a rural commission into banks taking place right now. I did note that the Commonwealth Bank was very this decision today by Bankwest at arms length, but there’s no doubt, being a fully owned subsidiary that those inside the Commonwealth Bank would be highly cognizant as to what’s taking place at Bankwest. Where I get a little concerned about this is that, there’ll be many elderly Australians who still would bank through the branch network, many young Australians, I recognize, would not. But you’ve got to still have services available for all of your customer base and not just some of your customer base.

Kevin Hogan: Ross, absolutely. And look, there’s no arm’s length. As you know, they are a fully owned 63 and there’s no Chinese whispers there, they’re the same organisation. But, again, you raise a good point, because in a lot of the communities that you’ve mentioned just stand whether Bankwest are closing their branches, and obviously in rural places as well without being closed previously.

While they say that the mobile apps or the apps are being very well used by younger generations, we know people who have grandparents or parents who still don’t use a computer. So they need to cater for the full population and their full customer base, and that means they cannot withdraw from all the places they are where they are offering a whole range of services that different age peoples can use. That’s their obligation.

Ross Greenwood: I think it’s a really important one, and of course we can hear that this inquiry from the house of representatives and from federal members are watching the banks to see what their behaviour is. Go back only, I think it’s five years ago, they were close on 7,000 bank branches around Australia, I think it might be getting down close 5,800 now. Kevin Hogan is the federal member for Page, and also was on the house of representatives standing economics committee. And, Kevin, I appreciate your time here on the program this evening.

Kevin Hogan: Thanks, Ross.

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