950828

Australian bank

fees re-regulation

seen unlikely

CANBERRA: The Australian government is unlikely to re-regulate bank fees, although it may further slow an inevitable trend in the banking industry towards user-pay fees on retail accounts, analysts said.

Treasurer Ralph Willis on Sunday threatened the banks with re-regulation of bank fees if they did not reduce the burden of flat account fees on low balance accounts.

"The politicians are just taking advantage of a grass roots issue -- everyone is more sensible than that, both the banks and the government," said one Sydney-based banking analyst.

"Re-regulation is definitely not the answer and the government knows it," the analyst said.

However the political posturing ahead of an election early next year was likely to help further delay what is an inevitable banking trend towards a greater reliance on account fees in general and user-pays fees in particular, analysts said.

"The banks are going to be increasingly reliant on fees as margins contract," said another Sydney banking analyst.

"It may be politically unpalatable, but it's just a matter of time before the system of user pays charges gets introduced," the analyst said.

"This PSA (Prices Surveillance Authority) report (in July) has slowed it down and this latest posturing may slow it further, but it will come - it has to," the analyst said.

Currently the banks use a mixture of flat fees on retail accounts and transaction fees to recover the costs of running these retail accounts, which contain around A$100 billion or 48 percent of of deposits and around 30 percent of liabilities.

All the major banks - The Australia and New Zealand Banking Group Ltd Westpac Banking Corp, the National Australia Bank Ltd and the Commonwealth Bank of Australia - apply a monthly account keeping fee.

But this A$2 a month fee, along with the transaction fees applied on automatic teller machines (ATM) and point of sale funds transfer transactions are waived whenever the account balance rises above a certain level, usually A$500.

Only 41 percent of retail accounts currently incur fees and banks say those fees paid recoup less than 15 percent of the accounts' costs.

Willis has campaigned in particular against this flat account keeping fee and the A$500 threshold, arguing it unfairly hurts those on lower incomes. "It's just grossly unfair and it has to change," Willis said.

Willis said the banks must respond to the recommendations of the PSA report by September 15.-Reuter