Banking Culture – Page 2 – Digital Finance Analytics (DFA) Blog

Only A People’s Bank Will Tame The Savage Beast: With Robbie Barwick

Robbie Barwick and I parse the latest from the Regional Banking Inquiry. The Senators are on the scent now, and Bankwest got a right pasting…

Here’s the press release this is from:

https://citizensparty.org.au/media-releases/bankwest-betrayal-west-aussies-test-government

Here’s the details. What you can do: Call and email WA Labor MPs to demand they stand up to BankWest and CBA and tell their boss Anthony Albanese to re-establish a People’s Bank:

Member for Tangney Sam Lim Ph: (08) 9354 9633 Email: Sam.Lim.MP@aph.gov.au
Member for Hasluck Tania Lawrence Ph: (08) 6245 3340 Email: Tania.Lawrence.MP@aph.gov.au
Member for Pearce Tracey Roberts Ph: (08) 6500 6499 Email: Tracey.Roberts.MP@aph.gov.au
Member for Swan Zaneta Mascarenhas Ph: (08) 9355 0099 Email: Zaneta.Mascarenhas.MP@aph.gov.au
Member for Cowan Dr Anne Aly Ph: (08) 9409 4517 Email: Anne.Aly.MP@aph.gov.au
Member for Burt Matt Keogh Ph: (08) 9390 0180 Email: Matt.Keogh.MP@aph.gov.au
Member for Perth Patrick Gorman Ph: (08) 9272 3411 Email: Patrick.Gorman.MP@aph.gov.au
Member for Brand Madeleine King Ph: (08) 9527 9377 Email: Madeleine.King.MP@aph.gov.au
Member for Fremantle Josh Wilson Ph: (08) 9335 8555 Email: Josh.Wilson.MP@aph.gov.au

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

A Question Of Democracy!

This week the Senate held hearings into the proposed changes to the way the RBA works. The original review was led by three Technocrats included a recommendation to remove the overrule power. This power specifically, section 11 of the Reserve Bank Act 1959 enables the federal treasurer to “overrule” an action taken by the Reserve Bank in extreme situations, via a clear and determined process, and even though no Australian government had used it in the more than 60 years it is important. It’s supposed to be a democratic fail-safe.

The Technocrats recommended the overrule power should be removed from the act. Their reasoning was that there was a risk that the federal treasurer, and by extension the federal government, might abuse that power. But what if the RBA abuses their power? The proposed change was not supported by the bulk of those who appeared in the Senate hearings, so today we look at the evidence provided.

At the heart of the issue is this. How accountable should the RBA be? And if there is no democratic override from the section 11 power, what happens if the Economists at the RBA set monetary policy in a way that badly impacts ordinary people, bearing in mind that another recommendation was to strike safeguarding the “welfare of all Australians” from their objectives. The focus will be on inflation and employment, only.

Central bankers are not infallible, sometimes makes mistakes, and frankly are already not accountable for their decisions, right or wrong. It’s a question of democracy.

So standing back, it seems it was the Technocrats and Economists who wanted to remove the section 11 power, but those with real lived experience, from both the Central Bank, and Government, as well as many respected observers, all agree.

Democracy would be sacrificed, and the Central Bank would be even less accountable if the power was removed. In other words, it is a question of democracy. And more broadly the idea of unelected Central Banks, being able to impose monetary policy decisions without question should terrify us all.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

The Great Australian Savings Account Rip-Off!

If you have savings with a bank in Australia, it is highly likely you are being ripped off. After all, Australian Consumers depend on retail deposit products to conduct their everyday banking, to safely store over $1.4 trillion of their savings and, importantly, to earn a decent return on these funds.

However, as I have been highlighting in recent shows, changes in the cash rate (often referred to as the ‘official interest rate’) via the RBA, and which is the rate paid on lending between banks in the overnight cash market only indirectly affect the cost of funding from retail deposits and the interest rates paid on retail deposit products.

Banks are quick to lift mortgage rates on mortgages, but have been significantly less market driven in terms of deposit rates, with many savers loosing out. Yet relatively few consumers switch deposit products, despite there often being a range of alternative products offering better interest rates and conditions. This loyalty tax means consumers earn significantly less than they should, over all on deposits, which boosts bank profits significantly.

So now the ACCC just completed a report on Retail Deposit Account. They gathered information, and documents on retail deposit products supplied by 14 of the largest banks in Australia. These banks collectively hold more than 90% of household deposits in Australia. This included seeking information directly from these banks as to their retail deposit products and from APRA and RBA, as well as reviewing the information available to the public on the banks’ websites.

The ACCC findings highlights that despite the importance of transaction accounts, savings accounts and term deposits, the ongoing challenges consumers face in searching for, comparing, and switching between products means that consumer engagement with the market for retail deposit products is relatively low. This low level of engagement means many consumers miss out on earning more from their savings.

Widespread strategic and selective pricing also adds difficulty for consumers when seeking to locate key product information and compare market offerings. This lack of transparency may also damage consumer confidence in the market.

Given the range of factors that banks take into account and the strategic pricing approaches they employ when setting their retail deposit rates, the interest rates received by consumers do not automatically follow movements in the cash rate target.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

You What? The Use Of Cash Is Up!!

An average of more than 50 UK bank branches have closed each month since 2015 and campaigners fear some retailers could stop accepting cash if it becomes too burdensome to process. That said, under government rules, free withdrawals and deposits will need to be available within one mile for people living in urban areas. In rural areas, where there are concerns over “cash deserts”, where the maximum distance is three miles.

This is important because cash remains a necessity for millions of people, research has found, with the elderly and those with disabilities among those likely to struggle. Branches have been more likely to close in disadvantaged areas.

Of course, Banks have pointed to the large reduction in branch use – a trend accelerated by the Covid pandemic – and the popularity of managing money via smartphones, as good reason for diluting their branch network.

But a recent survey by Age UK suggested that, among those who were uncomfortable about digital banking, the key concerns were fraud and scams, a lack of trust in online banking services, and a lack of computer skills.

And now, The British Retail Consortium says cash use has grown for the first time in 10 years as shoppers keep a close eye on their budgets while prices rise, retailers have said. They said 19% of purchases were made with notes and coins last year, echoing a report by banks showing a slight rebound. That’s up from 15% the previous year. Until 2015, notes and coins were used in more than half of transactions and, while card use now dominated, cash still had its benefits. Consumers made smaller but more frequent payments, the survey found.

The consortium said consumers were budgeting carefully to try to cope with cost of living pressures, and there was also a “natural return” for cash after it slumped during the pandemic.

It is essential use of cash is protected, you cannot leave it to the market, where banks are making a killing from extra fees on card transaction costs as a result of removing access to cash.

Australia’s Leading Expert Smashes ASIC!

The Senate Inquiry into ASIC took further evidence this past week. One notable contribution was from an academic, who really went to town on the role and purpose of the regulator. Indeed, he posed the question” Why does ASIC not enforce the law….”?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

APRA Hopeless On Branch Closures…

Journalist Dale Webster over at The Regional has rightly launched an attack on APRA, the banking regulator.

https://www.theregional.com.au/post/apra-bogged-in-a-data-mess-of-its-own-making

They released their annual points of presence data that showed an 11 per cent fall in bank branches nationally in 12 months. It triggered HEADLINES around Australia last week screamed out about bank closures. Channel Nine was one of many media outlets that picked up the story, reporting 424 branches had “shut their doors for the final time”.

As Dale writes, the problem is APRA never actually said that.

“The latest statistics show a further decline in bank branches in the year to 30 June 2023, with a reduction of 424 branches across Australia (11 per cent), including 122 branches (7 per cent) in regional and remote areas. This continues a trend that has seen branch numbers decline by 34 per cent in regional and remote areas, and 37 per cent overall, since the end of June 2017.”

What unsuspecting media did not pick up on was that among those 424 branches were a number of sites that had been stripped of branch status because they no longer provided the level of service required to be classified as such by law.

The doors are still very much open but they are among the growing number of banks that have no tellers and customers can only get cash from an ATM.

So we are left with what could be described as a bit of a situation, according to Dale. I think it is more deliberate, as APRA again manages to hide the real story – on this they have form, given their close alignment to the Banks. They are in my view hardly independent, nor an effective regulator.