Bank customers could end up footing the bill to keep regional branches alive, analysts warn

Bank customers could end up footing the bill to keep regional branches alive, amid secret negotiations between banks and the government.

The federal government has gagged banks from speaking out as talks continue about a proposed levy that could force banks with little or no regional presence to prop up regional branches, at a cost of tens of millions of dollars each.

The proposal follows hundreds of regional bank closures in recent years, which have devastated communities, particularly when no banks have been left in town.

Treasurer Jim Chalmers confirmed negotiations were underway, saying "it shouldn't surprise people" that the government regularly speaks with banks to find solutions, but that no conclusion had been reached.

The ABC understands the levy was the initial proposal put forward by the government.

Brian Johnson, bank analyst at MST Financial, said it was likely banks would pass on any additional cost to customers.

"It's not impossible to think that the logical response is to either cut deposit rates or hike home loan rates," he said.

The levy could mean banks with little or no regional presence, like digital-based companies, would pay tens of millions to those with a regional presence.

No guarantee customers will pay

While there's no guarantee banks would pass on extra costs to customers, analysts said the now-paused decision by Commonwealth Bank to charge customers $3 to withdraw cash from branches and post offices was a sign that some banks could choose that option.

Mr Johnson also warned against further investment in physical branches, given the growing reliance on online banking.

"We have banks maintaining or growing investments in regional branches in a time where, as your customers age, they move more and more towards digital interaction," he said.

"So that's the downside of it — it's not really keeping pace with the change of technology."

While banks have signed non-disclosure agreements, Bank of Queensland (BOQ) chair Warwick Negus expressed concern at the company's annual general meeting this week.

"Recent media reports about a new bank levy have rightly concerned our shareholders," he said.

"BOQ supports well-considered policies with thorough consultation that will support Australians, particularly those experiencing vulnerability and their unique need for both physical branches and access to cash.

"However, the proposed levy as reported is inequitable and disproportionate, affecting mid-tier and international banks, potentially hindering competition, productivity and innovation. It contrasts with the government's welcome competition and productivity initiatives."

After reports in The Australian Financial Review this week, Dr Chalmers confirmed that a heavier reliance on Australia Post and "smart" ATMs — that can deposit money, too — were "part of the conversation but not the only part of the conversation".

Economist Chris Richardson said the government should also consider footing the bill itself.

"I would prefer to see taxpayers just pay a subsidy, and one way or another, banks could say 'well yes, we'll take the subsidy and we'll represent in the bush,' or 'we won't take the subsidy and we won't represent,'" he said.

Union supports levy

National secretary of the Finance Sector Union, Julia Angrisano, expressed support for a levy proposal as a solution to banks' rapid retreat from the regions in recent years.

"Those smaller banks who are committed to those local communities, this would be a good outcome for them because I think they would receive some sort of financial support to maintain their presence," she said.

"If, at the end of the day, they're doing the right thing by workers and those communities, then why shouldn't they be supported for that?"

She said the big banks, in total, had made more than $30 billion in profits this year, so could afford to keep branches open.

"Big banks can afford to keep all of their doors open, they choose not to," she said.

"They're making choices about profit over people, and I do think that a levy might just change their behaviour."